According to the Financial Times, Chinese regulators have convened an emergency conference with domestic and foreign banks to discuss securing the country’s offshore assets from U.S.-led sanctions on April 22.
The South China Morning Post (SCMP) reported that China witnessed the United States and its allies thrash Moscow’s economy with “astonishing speed, coordination, and power.”
According to SCMP, the U.S. is currently examining whether the same economic weapons will work against China in the future. Therefore, as the Financial Times reported, Chinese officials are concerned that similar sanctions could be imposed on Beijing in the event of a regional military conflict or other crisis.
The internal meeting showed that China was shaken because at least three pillars of their thinking were broken.
First is “Interest determinism”
Information on the EU’s official website shows that Russia supplied more than 40% of the EU’s total gas consumption, 27% of oil, and 46% of coal imports in 2021.
According to Euro News, if the EU banned Russian energy imports, governments would have to ration gas among businesses to protect homes and hospitals.
Michael Vassiliadis, Head of Germany’s BCE Union, said that it would cost hundreds of thousands of job losses even to shut off partial gas supplies. However, the EU is pushing forward with its energy embargo against Russia.
This move from the EU shows that security is more important than economic interests.
Second, China believes that each country minds its own business and won’t interfere in others’ problems
The Financial Times reported that a Chinese invasion of Taiwan is a probable cause for such sanctions. A delegation briefed in 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.”
Take the Russia-Ukraine war as an example. The EU and NATO have recently taken a decisive step against Russia, showing that they believe that peace must be defended, security is indivisible, and aggressors must not be tolerated.
According to Euro News, European leaders returning from Ukraine said that the country needs even more from its allies to prevent Russia’s further slaughter of civilians.
NATO said on April 8 that the alliance urges Putin to halt the conflict immediately. They also ask Russia to withdraw all its forces from Ukraine without conditions and engage in genuine diplomacy.
Thirdly, “unbalanced economic and political development is the absolute law of capitalist development”
This is the theoretical basis for China to draw in the European Union from the U.S. and Europe, separate the West, and trigger conflicts. However, sanctions against Russia demonstrate the West’s unity and power under the leadership of the United States.
These three logics of thinking have been successful in China’s experience. However, the result is different according to the current situation.
So far, the Russian-Ukrainian war has affected two illusions about China’s armed reunification with Taiwan. The first one is a lightning strike and a quick victory over the Taiwan Strait. The second one is mutual economic dependence and limiting the strength of Western sanctions.
The emergency meeting between the banks and the Ministry of Finance was a response to the second illusion being shattered.
Finbarr Birmingham said on SCMP that the U.S. has already started data modeling.
It includes seizing Chinese banks’ assets abroad and freezing the assets of Chinese companies and oligarchs. Moreover, the U.S. has delisted Chinese companies in the short term and asked other allies to cut off their supply chains with China.
China wants to figure out how to effectively respond to the sanctions. However, the answer from economists and international economic circles has mainly been negative so far.
Andrew Collier, Managing Director of Orient Capital Research, said that Chinese authorities were correct in their concerns because China lacks alternatives. However, he added that U.S. sanctions were disastrous.
The Financial Times cited another source in the meeting that no one could develop a solution to the problem. According to this person, China’s banking system is not ready for an asset freeze or exclusion from SWIFT as the U.S. has done with Russia.