Washington’s reported threats to sanction Chinese banks and potentially remove China from the Swift network have raised concerns among analysts, who warn of severe global financial instability and damage to US-China relations.
Analysts stress that any financial sanctions against China, a major trading partner with the world, would disrupt transactions in Europe and the US, where businesses heavily rely on China. Moreover, removing China from the Swift network would create significant blockages in trade transactions, leading to cost-push inflation across the board.
In addition to the economic consequences, sanctions would further strain the already tense US-China ties, potentially escalating the conflict and making cooperation on other issues more difficult. Analysts also highlight China’s efforts to develop its own intercountry transaction system and internationalize the yuan, which could accelerate if bank sanctions were imposed.
The Wall Street Journal reported on Monday, without elaboration, that Washington was drafting sanctions to help US Secretary of State Antony Blinken persuade Beijing to stop any commercial support for Russia’s military production.
Brian Wong, a fellow at the Centre on Contemporary China and the World at the University of Hong Kong, warns that such sanctions would create a gargantuan source of financial instability for not only China, but also the US itself. He emphasizes that this could severely impede the interests of American companies and investors in China, especially given the likely retaliation that would come either immediately or in due course.
James Chin, a professor of Asian studies at the University of Tasmania in Australia, adds that removing China from the Swift network would be a huge problem, as China is a main trading partner for many countries around the world. He believes this action would face strong opposition from European countries and others that do a lot of business with China.
Denny Roy, senior fellow at the East-West Centre think tank in Hawaii, notes that broader ties between China and the US would suffer if bank sanctions were imposed. He says it would risk causing a major bilateral crisis that would make it impossible to work constructively with China on any issue.
The Reuters news agency reported on Wednesday that the US had “preliminarily discussed sanctions on some Chinese banks”, but with no short-term plan to carry out such measures. The Reuters report, which quoted a US official speaking on condition of anonymity, said Washington hoped diplomacy would “avert the need for such action”.
Wong calls the exploration of bank sanctions “largely a calculated bluff” and a “signal” from the US, who want to increase pressure on China over its stance on Russia.
Russia and China have nearly eliminated the US dollar from two-way commerce according to Russian Foreign Minister Sergey Lavrov, state-owned Russian news service TASS reported on Monday, and instead favor the yuan and rouble.
Zha Daojiong, an international studies professor at Peking University, poses the question of what the US would do about the aftermath of such sanctions. He asks, for example, what if Russia’s capacity to sustain itself in the war continued unabated?
