Dear Wealth Daily reader:

For decades China has been slowly closing in around the US. They've infiltrated our economy and bought our debt.

Each year they dig themselves in a stronger foothold.

But now I'm starting to get worried.

And I'm not alone.

Secretary of State Condoleezza Rice said that the U.S. government, not just the Pentagon, is beginning to have serious concerns about China's military buildup.

I, as well as many others, have had concerns over China's military expansion for years. But the recent comments made by Condoleezza Rice have only solidified my beliefs of coming troubles between the US and China.

I want you to hear this straight from the horse's mouth.

"There is rising concern here about military modernization in China. And while we recognize and believe very strongly that the goal of everyone has to be to integrate China as fully into the international system as possible, and to try to create conditions in which China is a positive force, it is also entirely appropriate to be concerned that that happen before there is a major military escalation of China's capability."

Rice continues...

"There is no doubt that we have concerns about the size and pace of the Chinese military buildup and it's not just the Pentagon."

The Pentagon is currently working on a report regarding China's growing military operations.

But here's what get me. The report was officially required to be delivered to Congress by March 1. However is has yet to see the light of day.

What is in this report, I can't say for sure. But I believe that it can't be good.

And while we continue to keep on eye on the communist country, China is doing everything it can to make allies around the world.

Within one week I've read three stories about how China is making friends with the rest of the world.

I'll quickly summarize them for you.
Sino-Romanian relations

Chief of the General Staff of China's People's Liberation Army Liang Guanglie and Romanian counterpart Eugen Badalan have recently agreed to further enhance the friendly exchanges and cooperation between the two sides.

Liang said the development of Sino-Romanian military friendly relations tallies with the fundamental interest of the two peoples and also contributes to the overall advancement of mutual ties.
Sino-Russia relations

Last week, Chinese President Hu Jintao and Russian President Vladimir Putin signed a "China-Russia Joint Statement on the 21st Century World Order."
Sino- Vietnamese relations

On July 18 Vietnamese President Tran Duc Luong will pay a five-day official visit to China with an indication of Vietnam's determination and desire to bring friendly and cooperative ties with China to a new height.

China already has 267 investment projects in Vietnam with a total registered capital of 545 million dollars.

Now I'll ask you; Is it a mere coincidence or not, that these countries are either current or former communists states? I don't think so.

And here's a suspicious story.

A large shipment of Chinese military equipment was found in Ecuador.

The Ecuadorian government is currently investigating the shipment of military goods to the Ecuadorian military that was not declared in customs documents but is unsure where the cargo was headed.

The shipment included 12,000 uniforms, two helicopters, nine dump trucks and other military equipment.

All these things keep brining me back to the same theory.

This morning, I listened in as Mike Schaefer and Brian Hicks interviewed Matthew Simmons about the state of the world's oil supply.

In that interview, which lasted 55 minutes, Simmons dropped some bombshell predictions. Predictions like $200 a barrel oil... and $70 mcf natural gas.

But the one that stuck in my head is Matthew's description of today's world situation. He said it feels eerily like December 1939.

- Luke Burgess