China before potential sanctions from the West

Yesterday (May 8), Reuters quoted the director of the US Central Intelligence Agency (CIA) William Burns, speaking at an event published by the newspaper. Financial Times held on May 7 in Washington (USA), saying that China is closely monitoring the campaign military of the Russia in Ukraine.

Lessons for Beijing

“The Chinese leadership is looking very carefully at all that happens (involving Ukraine – NV) with the costs and consequences of any attempt to use force to control Taiwan.” Mr. Burns said.

Meanwhile, the sheet South China Morning Post quoted Chinese Vice Foreign Minister Luo Yucheng, speaking in an online security forum on May 7, claiming that the US would face “unthinkable consequences” if Washington ” playing cards” Taiwan and Beijing will not be threatened by sanctions as they are for Moscow.

Rate the above problem when answering Youth On May 8th, Assoc. Russia is a lesson for China’s leaders, and points to the extent of Western control over the financial system so important that it is almost irreplaceable. Compared with Russia, China’s economy is more integrated and more dependent on these systems, making it more vulnerable to the imposition of similar sanctions. A typical example in the above financial system is the payment information system SWIFT, which Russia was excluded from after conducting a military campaign against Ukraine.

China’s central bank must hedge against possible risks if the West imposes sanctions Reuters

According to expert Gerard DiPippo – of the economic research program of the Center for Strategic and International Studies (CSIS, USA), sanctions aimed at Beijing like the way Washington applies to Moscow will have great consequences for the country. China. The reason is that as of 2021, China has 10 times the GDP of Russia, Chinese banks have 30 times more total assets than Russian banks, and foreign direct investment in China. 6 times more than Russia.

China’s preparation

Assessing China’s solution to hedging the risk of sanctions, Mr. Nagy said: “China’s response will probably be to strengthen the economy and accelerate the internationalization of the yuan.” .

But according to him, the problem is that with the above approach, China is struggling with its dependence on markets and technology of the West for development. “Beijing’s turn to the Belt and Road countries as an alternative to Western countries will not sustain the necessary economic growth that China needs for a large budget,” he said. stable socio-economic growth. From the 1950s to the 1970s, China may have been separated from the West, but the economic context and life of the Chinese people at that time were far different from today, who are living an affluent lifestyle. China’s major cities such as BeijingShanghai, Nanjing… have 100 million consumers middle class enjoys the benefits of an economy linked to the outside world. So if China’s economy falls into a situation of “blockade” like Russia’s now, it will cause great internal turmoil,” said Assoc.

Meanwhile, China is said to be planning to hedge against the risk of sanctions. At the end of April, Chinese regulators held an emergency meeting to discuss how to protect overseas assets from sanctions like the US currently applies to Russia. According to the sheet Financial Times Citing information from a number of “insiders”, attending the meeting, the event included officials from the Central Bank and Ministry of Finance of China, executives from dozens of financial companies in and around the world. foreign. At the meeting, the Ministry of Finance said that all major domestic and foreign banks operating in China are represented.

The above information was transmitted when some unverified sources claimed that many business man Mainland China and Hong Kong are looking to sell off assets in Western countries, and redirect investment to some Southeast Asian countries with little risk of “making trouble” for China.

In addition, China is also expanding its CIPS payment information system developed by China to reduce dependence on SWIFT, and at the same time to strengthen the internationalization of the yuan, such as seeking to reach an agreement with Saudi Arabia. Saudi Arabia on the use of renminbi. However, according to a recent analysis in Nikkei Asia, CIPS, although born in 2015, is still too small compared to SWIFT. Specifically, as of March, CIPS processed about 14,150 transactions per day while SWIFT processed more than 40 million transactions per day. If it finds a way to quickly expand CIPS, which mainly trade in yuan, it will make it difficult for China to control the yuan in foreign markets. Not only that, accelerating the internationalization of the renminbi can help increase the proportion of this currency in the foreign currency reserves of many countries, causing the yuan to appreciate, affecting China’s export advantages. .

Therefore, Beijing is facing many challenges to avoid the risk of Western sanctions.