Officials concerned that measures taken against Moscow could also be applied to Beijing
The consequences of US sanctions on China would be ‘disastrous’, said an analyst © Qilai Shen/Bloomberg
Sun Yu in
Beijing
MAY 1 2022
Chinese regulators have held an emergency meeting with domestic and foreign
banks to discuss how they could protect the country’s overseas assets from
US-led sanctions similar to those imposed on Russia for its invasion of
Ukraine, according to people familiar with the discussion.
Officials are worried the same measures could be taken
against Beijing in the event of a regional military conflict or other crisis.
President Xi Jinping’s administration has maintained staunch support for
Vladimir Putin throughout the crisis but Chinese banks and companies remain
wary of transacting any business with Russian entities that could trigger US
sanctions.
The internal conference, held on April 22, included
officials from China’s central bank and finance ministry, as well as executives
from dozens of local and international lenders such as HSBC, the people said.
The ministry of finance said at the meeting that all large foreign and domestic
banks operating in China were represented.
They added that the meeting began with remarks from a senior
finance ministry official who said Xi’s administration had been put on alert by
the ability of the US and its allies to freeze the Russian central bank’s
dollar assets.
The officials and attendees did not mention specific
scenarios but one possible trigger for such sanctions is thought to be a
Chinese invasion of Taiwan, which China claims as its territory and has
threatened to invade if Taipei refuses to submit to its control indefinitely.
“If China attacks Taiwan, decoupling of the Chinese and
western economies will be far more severe than [decoupling with] Russia because
China’s economic footprint touches every part of the world,” said one of the
people briefed on the meeting.
Andrew Collier, managing director of Orient Capital Research
in Hong Kong, said the Chinese government was right to be concerned “because it
has very few alternatives and the consequences [of US financial sanctions] are
disastrous”.
Senior regulators including Yi Huiman, chairman of the China
Securities Regulatory Commission, and Xiao Gang, who headed the CSRC from 2013
to 2016, asked bankers in attendance what could be done to protect the nation’s
overseas assets, especially its $3.2tn in foreign reserves.
China’s vast dollar-denominated holdings range from more
than $1tn US Treasury bonds to New York office buildings. State-owned Dajia
Insurance Group, for example, owns the Waldorf Astoria New York.
“No one on site could think of a good solution to the
problem,” said another person briefed on the meeting. “China’s banking system
isn’t prepared for a freeze of its dollar assets or exclusion from the Swift
messaging system as the US has done to Russia.”
HSBC did not respond to a request for comment.
Some bankers suggested that the central bank could require
exporters to exchange all of their foreign exchange revenues for renminbi to
increase its onshore dollar holdings. Exporters are currently allowed to retain
a portion of their foreign exchange earnings for future use.
Recommended The Big Read The rising costs of China’s
friendship with Russia Others suggested a “significant” cut to the $50,000
quota that Chinese nationals are allowed to purchase every year for overseas
travel, education and other offshore purchases.
When one official asked Chinese bankers if they could
diversify into more yen or euro-backed assets, they replied that the idea was
not practical.
Some bankers present, however, doubted whether Washington
could ever afford to cut economic ties with China given its status as the
world’s second-largest economy, huge holdings of dollar assets and close trade
relationship with the US.
“It is difficult for the US to impose massive sanctions
against China,” agreed Collier. “It is like mutually assured destruction in a
nuclear war.”
Additional reporting by Tabby Kinder in Hong Kong
https://www.ft.com/content/45d5fcac-3e6d-420a-ac78-4b439e24b5de
No comments:
Post a Comment