- Chinese banks contribute to Russia’s invasion of Ukraine, US says.
- The United States is considering sanctions to cut Chinese banks off the dollar, according to the Wall Street Journal.
- However, it could accelerate China and Russia’s dedollarization efforts.
The United States is considering sanctions that could deprive some Chinese banks of their access to the dollar, according to the Wall Street Journal.
The measures are being taken to prevent what the United States sees as China’s support for Russia’s invasion of Ukraine, the outlet reported, citing people familiar with the matter.
Last week, Secretary of State Antony Blinken accused China of supplying Russia with crucial technological parts for its weapons industry.
“We see China sharing machine tools, semiconductors and other dual-use goods that have helped Russia rebuild the defense industrial base that sanctions and export controls had done so much to degrade “, he declared at a press conference after the war. G7 Foreign Ministers Meeting in Italy.
According to Chinese customs data, trade between the two countries will reach a peak of $240 billion in 2023, as China has become one of Russia’s largest suppliers of goods since Western companies left the Russian market after Russia’s invasion. Ukraine by this country in 2022.
A Chinese embassy spokesperson previously told Reuters that China was not a party to the war in Ukraine and that normal trade between China and Russia should not be interfered with or restricted.
While Russia found ways to circumvent sanctions, the United States last year sought to punish banks and other organizations facilitating trade.
The Journal reported that new sanctions on Chinese banks were being considered as an escalation option in case other diplomatic attempts to curb Chinese exports failed.
The report comes as Blinken visits China on Tuesday, where he is expected to respond to U.S. allegations that China is covertly ramping up its support for the Russian invasion.
The plan could backfire
Banning banks’ access to the dollar would have huge implications for China, whose economy is already in a precarious state after a housing debt crisis.
But it could also backfire on the United States by accelerating dedollarization efforts.
In response to previous sanctions, Russia and China have stepped up efforts to create non-dollar trading mechanisms.
China does not want to get rid of the dollar completely, but to reduce its dominance and ensure the security of its economy if the United States decides to impose even harsher sanctions.
The Financial Times reported last August that “Southern” economies, which have long criticized US domination of the financial system, are increasingly inclined to use currencies and trading platforms that do not require currency. American.
Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center think tank, told the Wall Street Journal that regional Chinese banks had emerged and had little involvement in dollar trading.
“Payment chains are slowly being rebuilt,” Prokopenko told the outlet. “The Russians and Chinese are constantly adapting to new conditions.”
The United States is betting that China’s financial ties with it are stronger than its relations with Russia.
“The West has underutilized leverage, especially given the dominance of the dollar and euro in the financial system,” Maria Snegovaya, a senior fellow at the Center for Strategic and International Studies, told the Journal.
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