China scrambles to protect overseas assets amid US fears of imposing Russian-style sanctions

Xi Jinping showed loyal support for Vladimir Putin during Russia’s invasion of Ukraine.

Kevin Frayer/Getty Images

  • Chinese officials are meeting with banks to find ways to protect overseas assets.
  • The country is reportedly concerned that the United States may impose sanctions similar to those imposed on Russia.
  • China is believed to hold around $3.2 trillion in foreign exchange reserves.
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China is reportedly taking steps to protect its overseas assets, fearing that the country could one day be subject to sanctions similar to those imposed on Russia.

The Russian invasion of Ukraine has provided harsh lessons for China, which is itself embroiled in a long-running dispute with Taiwan. China has long rejected its neighbor’s sovereignty claims, fueling speculation that it will one day fully invade and annex Taiwan.

The United States and other Western countries have imposed sanctions on Russia in an effort to stop Putin’s war in Ukraine. Sanctions include a ban on SWIFT, a total blockage of major Russian financial institutions, measures targeting Russia’s sovereign debt, and even sanctions against oligarchs and their families.

According to the Financial Times, Chinese officials recently held an emergency meeting with domestic and foreign banks to discuss how the state could protect its assets, should it ever face similar sanctions.

People familiar with the conference, which took place on April 22, told the FT that the meeting was made up of officials from China’s central bank and finance ministry, executives from dozens of local and international lenders such as HSBC and representatives of other national banks operating in China.

A source told the newspaper: “If China attacks Taiwan, the decoupling of the Chinese and Western economies will be much more severe than [decoupling with] Russia because China’s economic footprint touches every region of the world.”

China and Russia are working on a local alternative to the SWIFT payment system – the Russian Financial Message Transfer System and the Chinese Cross-Border Interbank Payment System.

According to the South China Morning Post, China has $3.2 trillion in foreign exchange reserves. The FT reported that top regulators, including Yi Huiman, chairman of the China Securities Regulatory Commission, and Xiao Gang, who headed the CSRC from 2013 to 2016, asked bankers how they could protect their overseas assets. .

“They are watching with great interest to see how effective sanctions applied to Russia could be effectively applied to China,” Douglas H. Paal, a nonresident scholar at the Carnegie Endowment for International Peace, told Insider in March.

“If there is an invasion of Taiwan, China would expect the United States to invoke as wide a range of sanctions as possible.”

Andrew Collier, managing director of Orient Capital Research in Hong Kong, told the paper that the Chinese government was right to be concerned “because it has very few alternatives and the consequences [of US financial sanctions] are disastrous.”

Insider contacted China’s Ministry of Foreign Affairs for comment.

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