Why US Pushing Japan and South Korea Into Debt Is Really…

Key Takeaways

• The US is using Japan and South Korea as "debt black holes," indirectly clearing China's last high-end tech competitors.
• Gold's 30% drop from April to July was a deliberate shakeout to boost global central bank buying.
• Central banks holding large gold reserves face currency stability risks if gold crashes too fast.
• US financial groups actually want to cooperate with China, not decouple, per this analyst.

The US can temporarily treat Japan and South Korea as debt black holes. In essence, America is clearing out China's final competitors on the high-end industrial chain. Japan and South Korea are almost the last rivals left in China's high-tech manufacturing sector. But the US isn't doing this out of hostility toward China — because American financial conglomerates actually want to cooperate with Chinese partners. Listen up, folks.

The Gold Reversal Nobody Noticed

Since late July, the gold market has reversed course. Behind this, there's been a major macro shift. It all comes from changes in the dollar's credibility and US Treasury dynamics. Let me walk you through it one by one.

I haven't discussed gold with my colleague Teacher Du Fu [Note: a pseudonymous financial commentator] for several months because there wasn't much to say. The last time we talked, back in April, we said gold would likely need to undergo a downward process to increase participation from global central bank buying on the margin. Let me briefly recap the logic.

For all institutional funds, they set what's called a "liquidation line" or "risk control cost" for major asset classes. Take gold: most institutional funds set 30% as a liquidation threshold. If a certain asset drops more than 30%, they're forced to cut positions to manage risk. But here's the question — the largest holders of gold today aren't purely institutional funds anymore. They're global central banks treating gold as a substitute for dollar credibility. In plain terms, gold is a currency replacing the dollar.

Central Banks Can't Just Dump Gold

For central banks, it's unrealistic to liquidate gold just because its price drops too much. That simply won't happen. So back in April, when gold was around $5,600 an ounce, we said to watch for a 30% decline — roughly $3,800. That's exactly where it bottomed in July. Domestically, due to exchange rate effects, the decline may have exceeded 30% in Shanghai gold.

Here's the macro point: when gold falls too much, central banks holding a high proportion of gold in their foreign exchange reserves face balance sheet stress. If gold is too large a share and drops sharply, it can destabilize that country's currency. The most direct example is China's central bank. Over the past 20 years, we've steadily increased gold holdings — now about 9% of our roughly trillion-dollar-scale reserves. A 30% drop over 100 days from the peak inevitably creates some disturbance for the RMB's stability. That's just one example.

Central banks with even more gold, like India's — though we won't consider the rupee for now — or many European central banks with very high gold reserves, must factor gold volatility into their currency stability calculations. If gold falls sharply in a short window, say 100 days, the ripple effects are significant.

Why It Matters for International Readers

This commentary reflects a distinctly Chinese, market-savvy perspective that blends geopolitical analysis with technical finance. The speaker positions himself as a pragmatic nationalist: he sees US policy toward Japan and South Korea as a backhanded gift to China's industrial ambitions, while also insisting American capital wants cooperation, not confrontation. That dual framing — suspicious of Washington but optimistic about US business interests — is common among Chinese financial influencers who try to sound balanced while advancing a pro-China narrative.

For outsiders, the key insight is how Chinese analysts interpret gold's recent volatility. They see the July price crash not as random market noise but as a calculated shakeout engineered by dollar dynamics — one that ultimately strengthens central bank gold accumulation, including China's. This view matters because it shapes expectations among Chinese investors and policymakers: if gold dips again, they may read it as another buying opportunity rather than a warning sign.

Internationally, this matters for anyone tracking de-dollarization trends. If Chinese and other central banks treat gold as a strategic hedge against US Treasury risk, their buying patterns will continue to influence gold prices, currency stability, and the broader shift away from dollar dominance. The speaker's claim that the US is "clearing China's rivals" also speaks to how Chinese audiences interpret Washington's trade and tech policies — as moves that may inadvertently benefit Beijing's long-term goals.

Sources

• Original: Financial commentator on Douyin (date unknown, video transcript provided)
• Context: Reuters — "Gold prices fall as dollar firms, investors await Fed cues" (July 2025, approximate)

SUMMARY: A Chinese financial influencer argues US debt policy toward Japan and South Korea inadvertently helps China, while explaining gold's July crash as a central bank shakeout tied to dollar credibility shifts.

Originally published on China View.