Sam Tabahriti/. Business Insider (India)

May 1, 2022, 19:19 IST

China is reportedly taking steps to protect its overseas assets,amid fears the country could one day be subjected to sanctions similar to thoseimposed on Russia.

The Russian invasion of Ukraine has provided tough lessons for China, which is itself involvedin a long-running dispute with Taiwan. China has long rejected its neighbor'sclaims to sovereignty, fuelling speculation it will one day invade and annex Taiwan entirely.

The US and other Western nations have imposed sanctions against Russia in a bid to stop Putin'swar in Ukraine. Sanctions include a SWIFT ban, a full blocking on large Russian financialinstitutions, measures targeting Russia's sovereign debt, and even sanctionsagainst oligarchs and their families.

According to the Financial Times, Chinese officials recently held anemergency meeting with domestic and foreign banks to discuss how the statemight protect its assets, should it ever face similar penalties.

People familiar with the conference, which took place onApril 22, told the FT the meeting was made up of officials from China's centralbank and finance ministry, executives from dozens of local and internationallenders such as HSBC, and representatives from other domestic banks operatingin China.

One source told the newspaper: "If China attacks Taiwan, decoupling ofthe Chinese and western economies will be far more severe than [decouplingwith] Russia because China's economic footprint touches every part of theworld."

China and Russia are working on a homegrown alternative to the SWIFT payment system– Russia's System for Transfer of Financial Messages, and China's Cross-BorderInterbank Payment System.

According to the South China Morning Post, China has $3.2 trillion inforeign reserves. The FT reported that senior regulators including Yi Huiman,chairman of the China Securities Regulatory Commission, and Xiao Gang, who headthe CSRC from 2013 to 2016, asked bankers how they could protect their overseasassets.

"They are watching with great interest to see how effective sanctionsapplied to Russia might be effectively applied to China," Douglas H. Paal,a non-resident scholar at the Carnegie Endowment for International Peace, told Insider in March.

"If there is an invasion of Taiwan, China would expect the US to summonas broad a range of sanctions as possible."

AndrewCollier, managing director of Orient Capital Research in Hong Kong, told thenewspaper the Chinese government was right to be concerned "because it hasvery few alternatives and the consequences [of US financial sanctions] aredisastrous."

Insiderapproached China's Ministry of Foreign Affairs for comment.