In the early 1980s, during a tense phase of the Cold War, the Soviet Union feared that America and its allies were contemplating a nuclear strike and looked for warning signs. The KGB’s list of indicators extended far beyond the military sphere. Large drives for blood donations, the slaughter of cattle and the movement of works of art could portend an impending attack.

Today there is a new kind of cold war between the US and China. And again, analysts are looking for signs of a possible conflict. The most likely flashpoint is Taiwan, the self-governing island claimed by China and backed by America. Should China plan to invade Taiwan, its military preparations would be difficult to hide. But before troops are deployed, other measures of an economic and financial nature could herald China’s intentions.

Western intelligence services need to decipher China’s economic activity

The Soviet Union, at the time, misinterpreted ordinary activities like blood drives as potential indicators of war. In the case of China, it’s even harder to see signs in the bigger picture. The country has spent decades improving its armed forces. It routinely stocks up on food. And it has hedged its economy against potential sanctions.

All of these measures have fueled fears of war, although they do not necessarily mean war is imminent. So the challenge for Western intelligence services is to imagine how China might deviate from these precautions in the run-up to an actual attack.

One area to focus on is commodities, particularly energy, food and metals. China would want to stock up on these goods before an invasion. Many of these goods come from abroad and are bought by the government, so trade data is a useful indicator of government intentions.

Developments worth paying attention to include large and continuous increases in supplies, sudden changes in imports or exports, purchases that go against the market, and movements that do not match historical trends. No single observation point indicates that war is imminent. But a plausible early warning system could be formed by pooling observations.

Energy and gas provide important clues

Energy is a good place to start. China imports almost three quarters of its oil consumption. While this fuel accounts for only 20 percent of the country’s energy use, it would be critical to any war effort. Military vehicles and trucks used to transport supplies are powered by it. If China starts to build up its reserves — enough for three months at current consumption rates — it would be one of the best signs the country is preparing for war, says Gabriel Collins of Rice University in Texas.

It will be difficult to spot a rise that deviates from recent trends. Chinese oil imports have been rising for a decade. The country is expanding its storage capacity, constructing underground storage facilities that are both safer and more difficult to spy on than open-air oil tanks. In times of war, however, China could largely limit its use to the armed forces. Signs of such rationing would be a clearer, albeit late, indicator.

Gas accounts for a far smaller share of China’s energy mix, but it could still provide clues of impending conflict. If China fears being cut off from foreign supplies, it would likely burn more coal, of which it has plenty. It could also make larger purchases. That was the case in the run-up to Russia’s invasion of Ukraine last year, when Russia’s main gas company cut supplies.

In the six months leading up to the attack, Chinese companies bought more than 91 percent of all liquefied natural gas purchased worldwide under fixed-term contracts (typically four years or longer), according to Collins and his colleague Steven Miles.

Food also points to a conflict

The companies signed contracts that called for near-term deliveries, a departure from China’s previous practice of focusing on future deliveries. Nine of the 20 state-owned companies involved in the purchase had never bought gas before. China may have simply decided to stock up before prices went up any further (which they did). However, according to Collins and Miles, the deals raise questions about China’s cooperation with Russia.

While fuel would be needed to power China’s war machine, food would have to be procured to feed the population. China imports more agricultural products than any other country. The country is obsessed with food security and has already stocked up enormously. In 2021, a government official said the country’s wheat reserves could meet needs for 18 months. Over the past decade, China has sharply increased its purchases of wheat, corn, rice and soybeans (see chart).

How would China change its behavior if war loomed? The answer is that it would probably buy more food. One product to keep an eye on is soybeans. China imports 84 percent of its stocks. Much of it is used to feed pigs. (Pork accounts for 60 percent of all meat consumption in China.)

The country currently has enough beans to feed its pigs for almost two months. A rapid increase in purchases could indicate the country is preparing for conflict, says Gustavo Ferreira, a US Army agriculture officer, especially if those purchases are not accompanied by a surge in livestock production or go against the market trend.

China’s trading partner would not mind an invasion of Taiwan

Some of this activity may be difficult to spot. The size of China’s grain stocks, for example, is hotly debated. With metals, the challenge could be even greater. Elements such as beryllium and niobium are used in the manufacture of military equipment. Platinum and palladium are used in engines. How much China owns of these metals, most of which are imported, is difficult to say because the country’s consumption patterns are unknown.

As with fuel and food, unusual metal purchases could be a sign. Changes in China’s exports would be a clearer indicator. It could become more reluctant to export rare earths, which are critical to many technologies. China has a virtual monopoly on many of these metals. In July it announced export controls on gallium and germanium, two metals used in chips. However, this was part of the technical competition with the US and not a sign of an impending hot war.

China gets many of its raw materials from countries that would not mind an invasion of Taiwan, nor would they abide by an embargo imposed by the West. But China’s head of state Xi Jinping has instructed his security chiefs to prepare for the “worst case”. They should ensure that China is as self-sufficient as possible in the event of war.

Financial markets react late to geopolitical dangers

Similar considerations underlie China’s approach to the financial system. It has launched a cross-border payment mechanism that could bypass Western financial institutions if needed – although currently most transactions still go through foreign platforms.

China and its state-owned companies are increasingly urging trading partners to sign contracts in yuan to reduce the country’s dependence on the dollar. If China is prepared for war, it could also convert its foreign exchange reserves from the dollar and euro into harder-to-possess assets like gold.

Financial markets tend to react late to geopolitical threats. But if investors got wind of China’s plans, there would be capital flight. The government would likely tighten its capital controls. Government agencies would also convert assets held by foreign trustees into cash and repatriate the proceeds. You could forgo some foreign investments or defer payments. In the days leading up to an attack, the government could freeze all foreign funds in China.

China is already practicing for the invasion

Some of these measures may come too late to serve as useful signals of war. Others could prove to be illusory indicators. When Xi speaks about national security, he says “stormy times” are ahead. The state’s efforts to seal the bulkheads could be mistaken for something worse. To a certain extent, that’s the point.

Part of China’s strategy is to convince the world that China is ready and willing, if not poised, to invade Taiwan. But the country’s behavior risks confirming the most pessimistic assumptions of Western analysts.

It was the same during the last Cold War. In 1983, NATO held a military exercise that was supposed to culminate in a simulated nuclear attack. Some Soviet officials, relying on indicators ascertained by the KGB, feared that the exercise could be a cover for a real attack. Today, as China practices invading Taiwan, Western analysts must be careful not to succumb to their own bias.

But if economic and financial indicators — along with satellite imagery, intelligence signals, and human sources — can help America and its allies anticipate war, they may be able to prevent it.