China is working to protect its overseas assets amid fears the US could impose Russia-style sanctions, reports say

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 those imposed on Russia.

The Russian invasion of Ukraine has provided tough lessons for China, which is itself involved in a long-running dispute with Taiwan. China has long rejected its neighbor's claims 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's war in Ukraine. Sanctions include a SWIFT ban, a full blocking on large 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 might protect its assets, should it ever face similar penalties.

People familiar with the conference, which took place on April 22, told the FT 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 from other domestic banks operating in China.

One source told the newspaper: "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."

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-Border Interbank Payment System.

According to the South China Morning Post, China has $3.2 trillion in foreign reserves. The FT reported that senior regulators including Yi Huiman, chairman of the China Securities Regulatory Commission, and Xiao Gang, who head 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 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 summon as broad a range of sanctions as possible."

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

Insider approached China's Ministry of Foreign Affairs for comment.