Other researchers called for a new economic grouping that could protect China in a sanctions tit-for-tat.
Ye Yan, an economist at China National Oil and Gas Exploration and Development Company, wrote in January that the cheaper Russian oil China has enjoyed as a result of Western sanctions had created a model for a future “anti-sanctions corporate network” that would allow member countries to trade discounted goods.
Chinese researchers also suggested Beijing exploit cracks within the European Union and between the US and its allies. One foreign analyst said there could be a lack of unity in the West.
“Achieving broad international consensus for a sanctions coalition on China would be orders of magnitude harder than for Russia due to the much larger volume of investments there and reliance on its market,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics in Washington.
SEEKING SOLUTIONS
Some analysts have highlighted the limits of yuan internationalisation, arguing instead that China should blunt sanctions by increasing its economic links with the US and its allies.
Yu, the former PBOC adviser, wrote in his 2022 paper that it was unlikely the US would seize trillions of dollars or refuse to pay the principal and interest on Treasury bills China holds.
“Due to the close economic and financial ties between China and the United States, the United States will not do something like ‘kill a thousand enemies and injure eight hundred of its own’,” Yu wrote.
Wang, the China International Futures official, made a similar argument last year, noting that gold was not a practical replacement for dollar reserves because of the costs and risks associated with the transport and storage of large quantities of the metal.
In light of these issues, many of the researchers suggest Beijing further open domestic financial markets to tie the interests of the US, its allies, as well as companies from these countries with China, increasing the costs of sanctions.
Partly in response to this, the EU and US have sought to de-risk and diversify supply chains and on-shore production of chips. But these policies would take time to bear fruit, Chorzempa said.
“China’s much more pronounced role in global value chains would also give it more opportunities for circumvention (of sanctions), and its ability to substitute foreign technology for indigenous production is far stronger than Russia’s,” he said.
Chen, the PBOC researcher, considered the “nuclear” option of China’s excision from SWIFT, and concluded that increasing cooperation with the US was the best way to shield China.
“The mutual penetration of the Chinese and American economies will inevitably weaken the willingness to impose financial sanctions,” he wrote.
Source: CNA
