China could be gearing up to invade Taiwan now that President Xi has installed a 'war cabinet', veteran investor Kyle Bass warns
- President Xi's changes mean he could be preparing to invade Taiwan, Kyle Bass said Tuesday.
- Xi put allies with defense links in key posts overseeing banking, finance and the economy, Bass said.
China could be readying itself to invade Taiwan within two years given its leader Xi Jinping has built what looks like a "war cabinet", veteran investor Kyle Bass has warned.
Any attack on Taiwan would then weigh on chipmaking stocks and carry on driving international investors away from Chinese stocks, the Hayman Capital Management boss told CNN's Julia Chatterley.
President Xi has elevated political allies with a background in defense to key posts controlling financial regulation, central banking, and economic policy, Bass said in the interview aired Tuesday.
"Just imagine if President Biden — in one move of a pen — removed the head of the SEC, the head of the central bank, and the finance minister," the hedge-fund founder said.
"They replaced all three of them in one move, and replaced them with the spy chief, a police chief, and a weapons manufacturer."
Bass — a longtime China bear who has blasted buyers of the country's stocks as irresponsible — suggested the appointments would not go down well with investors.
"What message is that sending to those that are invested in China?" Bass said. "That's why the markets had such a horrible response to the amendments that were made."
Chinese stocks sold off last week after Xi consolidated his grip on power. Hong Kong's Hang Seng index suffered its largest one-day loss of 2022 last Monday, dropping 6.4% as the Chinese president's shutout of internationalist reformers spooked investors.
An invasion of Taiwan by China would likely roil global markets as it would cut off much of the world's semiconductor supplies, Bass told CNN.
Taiwan Semiconductor Manufacturing Co. is the world's largest independent chipmaker. It's also the 17th-largest stock by valuation, with a $322 billion market capitalization.
TSMC — which makes many of the highest-end chips available — has started building manufacturing facilities in Arizona and other locations, Bass said. But it will struggle to construct those quickly enough if Xi invades Taiwan within the next couple of years, he added.
"The problem is those things take five years to build, and we're still right in the middle of building many chip foundries," he said.
Xi's speech at the close of the Communist Party Congress was another signal that China was shifting to a more aggressive stance on Taiwan, according to Bass.
The president told listeners to "prepare to undergo high winds and waves and even for the stormy seas of a major test" — a reference to an eventual invasion of the island, Bass believes.
"The words Xi used in his speeches led me to believe that he is absolutely going to move on Taiwan in the next year or two," the veteran investor told CNN.
"People say that I'm just warmongering – I'm reading the tea leaves.
"It's clear as day what's happening. The problem is, it puts the world in a very, very difficult position. I think that 'major test' is coming."