Stoking fears that China is preparing for an invasion of Taiwan, Chinese officials are looking for ways to defend their country from economic isolation should Western nations opt to sanction China in a similar fashion to how they sanctioned Russia after it invaded Ukraine.
The Daily Mail reported that China’s economic regulators held emergency meetings in late April with officials from the Chinese central bank, the finance ministry, domestic banks operating in China, and international leaders in the financial sectors like HSBC.
In the wake of Russian President Vladimir Putin’s invasion of Ukraine, Western nations locked arms and issued thorough sanctions on the Russian economy. These sanctions caused the Russian economy to plummet and prompted drastic retaliatory threats from the Russian government.
These Western sanctions greatly restricted Russia’s ability to conduct business with other nations by limiting its use of the SWIFT telecommunications network and making it virtually impossible for it to conduct business with the global reserve currency – the U.S. dollar.
The crippling effect these sanctions have had on the Russian economy prompted the emergency meeting between Chinese officials and financial executives. Chinese President Xi Jinping has been startled by the dollar freeze and is concerned about a similar policy being leveraged against China.
Reportedly, the U.S. is considering implementing similar packages of sanctions against China in the event that it moves forward with an invasion of Taiwan. Recent and repeated rhetoric from Chinese leadership indicates that it is not a matter of “if” but a matter of “when” China launches an invasion of Taiwan.
A source close to the Chinese officials who met said, “No one site could think of a good solution to the problem. 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.”
Reportedly, one idea proposed in the meeting was to force Chinese businesses that export to other nations to part ways with their holdings in U.S. dollars in exchange for Chinese renminbi.
Other proposed solutions such as swamping U.S. dollar holdings to favor the Euro were not thought to be practical.
Some of the Chinese leaders present doubted whether the U.S. even has the capacity to issue such sanctions on China’s economy.
Andrew Collier, managing director of Orient Capital Research in Hong Kong, said, “It is difficult for the U.S. to impose massive sanctions against China. It is like mutually assured destruction in a nuclear war.”