According to the Financial Times, China held an emergency meeting to discuss measures to protect its overseas assets in case of sanctions like the West has imposed on Russia.

The meeting, held on April 22, included key domestic and foreign investment bank personnel. Officials from China’s central bank, the Ministry of Finance, and many international banks also participated.

An official at the meeting remarked that China’s top officials had been alerted when the U.S. and its Western allies had frozen Russian central bank assets held in the U.S. in late February.

During the House Foreign Affairs Committee hearing Thursday, U.S. Secretary of State Antony Blinken said that the U.S. wants to confiscate frozen Russian Central Bank assets to rebuild Ukraine.

The U.S.’s strong move has worried China that it would also receive severe sanctions from the West if it were to invade Taiwan.

The Financial Times said, citing people at the meeting, “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.”

A senior securities official expressed deep concern at the meeting over China’s substantial foreign exchange reserves of $3.2 trillion in case of sanctions. He asked participants for solutions.

But another person at the meeting told the Financial Times, “No one on-site could think of a good solution to the problem.” He added, “China’s banking system isn’t prepared for a freeze of its dollar assets or exclusion from the Swift messaging system as the U.S. has done to Russia.”

As of 2020, China’s banking industry had $49.5 trillion in assets. The top four state-owned commercial banks are the Agricultural Bank of China, the Bank of China, the China Construction Bank, and the Industrial and Commercial Bank of China. Those banks are among the biggest banks in the world.

China holds $1.06 trillion of U.S. Treasurys, accounting for 3.5% of the total U.S. debt, second only to Japan.

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