Chinese banks hold crisis meeting for fear of US sanctions

Beijing worries that US sanctions against Moscow may one day apply to China.

Chinese regulators held an emergency meeting with all local and international banks in the country in late April. On the agenda: the possibilities of protecting foreign assets in the event that the US decides to impose sanctions on China. Insiders said to Financial Times there are fears in China that the West will one day impose economic sanctions on China, as it did for Russia after the invasion of Ukraine.

The crisis meeting, which took place on April 22, involved senior officials from the Chinese central bank, the finance minister and representatives of major private banks such as HSBC. Financial Times† But according to the Ministry of Finance, all major foreign and domestic banks would be involved in such a meeting.

The meeting began with comments from Chinese officials that Beijing is concerned about the possibility of the United States and its allies equalizing the foreign assets of the Russian central bank.

The Chinese authorities are now investigating whether it will also be possible to freeze China’s foreign assets in the event that the Asian country becomes involved in a war or other major geopolitical conflict. Beijing will continue to support Vladimir Putin’s war until further notice, but Chinese banks and companies are feverishly making sure that their dealings with Russia do not trigger US sanctions, the business newspaper reports.

“Decoupling Chinese and Western economies much more seriously than with Russia”

One possible scenario in which the West could impose sanctions on China is an invasion of the democratic island nation of Taiwan. The Beijing government continues to insist that the Taipei authorities give up their independence in order to fulfill the Communist Party’s “One-China” policy. Taiwan, which is officially still the Republic of China, however, continues undisturbed with its autonomy and national identity and has increasingly openly sought the support of Western shadow allies in recent years.

A Chinese invasion of Taiwan still seems unlikely for all sorts of pragmatic reasons, according to various experts. For example, a heavily defended island is harder to invade than a neighboring country you border at national borders.

“If China attacks Taiwan, the decoupling of the Chinese and Western economies will be much more severe than with Russia, as China’s economic footprint reaches all parts of the world,” the bank said. The Chinese government’s fears would be well-founded, according to Orient Capital Research’s CEO Andrew Collier, “because it has few alternatives and the consequences[af amerikanske finansielle sanktioner, red.]will be catastrophic, “he said. Financial Times

“Like mutually guaranteed destruction in a nuclear war”

The proposed measures to limit the damage of Western sanctions were sometimes very far-reaching. For example, some bankers suggested that China’s central bank require exporters in the country to exchange foreign exchange earnings for yuan in order to increase their dollar reserves. Currently, exporters are allowed to keep some of their currencies for future use.

An official also reportedly asked Chinese bankers to invest more in Japanese yen or euro-backed assets. According to bankers, this would not be practical.

At the crisis meeting, however, there were also doubts that the US would ever be able to cut off its economic ties to China completely, as the Asian country is the world’s second largest economy and owns a huge amount of US assets. “It is difficult for the United States to impose massive sanctions on China. It is like mutually guaranteed destruction in nuclear war, “Collier concludes.

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