US sanctions: economist Yu Yongding flags risk of Chinese bank assets being seized overseas
- Financial sanctions could come in any form, so Beijing must be prepared for worst-case scenario, says Yu Yongding, a former adviser to China’s central bank
- A precedent was set in 2012 when Bank of Kunlun was cut off from the dollar payment system, suffocating its cross-border business
If push comes to shove in their financial row, the United States could not only sanction Chinese banks, but also seize overseas Chinese assets, a prominent Beijing adviser warned on Wednesday.
However, barring Chinese banks from dealing with the US financial system is only one of many ways that the US could inflict pain on China in the financial realm, said Yu, a former adviser to China’s central bank.
“The financial sanctions could be done in a variety of forms, targeting banks or certain industries,” Yu said, adding that the US could seize Chinese overseas assets if conflicts break out. “This possibility can’t be ruled out.”
His warning reflects a growing concern among Chinese researchers and officials of an all-out “financial war” between China and the US, with many saying the US side would have a clear advantage thanks to the dominant role of the US dollar in cross-border investments and payments.
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US sanctions 11 Hong Kong and mainland officials including Hong Kong’s chief executive Carrie Lam
Financial institutions that deal with these individuals are at risk of being viewed by Washington as violating sanctions. Bloomberg News reported on Wednesday that even China’s state banks with operations in Hong Kong have started to review their ties with these individuals to manage the risks.
Yu said China faces “a series of threats from the US” in terms of financial restrictions.
When Bank of Kunlun, for example, was sanctioned by the US Department of the Treasury for financing oil shipments with Iran, the lender was cut off from the dollar payment system, suffocating its cross-border business.
“Such sanctions have been used before,” Yu said. “The US could continue to use them in the future. We must be very careful.”
On top of that, Yu said Washington could “extort” Chinese banks by levying huge fines to get them to comply with US demands.
Yu is not alone in predicting financial troubles with the US.
While the People’s Bank of China has remained largely muted, the debate is a heated one among economists and analysts in China who are speculating as to whether the US could use the Clearing House Interbank Payments System (Chips) and the Society of Worldwide Interbank Financial Telecommunication (Swift) to try to cut China off from the US dollar system.
Yu said Beijing’s options are limited, and it must prepare for the worst-case scenario.
At the same time, Washington is not yet ready to go to such extremes, Yu said without elaborating.
“From a long-term perspective, such an adjustment will greatly enhance China’s financial security and minimise the loss of a US financial war,” Yu said.