The US has already sanctioned mainland banks in the past. Financial decoupling is no longer unlikely. Chinese banks risk being excluded from the global dollar-based payment system. The Trump administration could sanction banks that do business with leaders implicated in the crackdown in Hong Kong. Internationalising the yuan is not a viable solution.
Beijing (AsiaNews) – The United States could confiscate the assets of Chinese banks if the financial war with China reaches a point of no return.
Already in the past, Washington has imposed sanctions on Chinese financial institutions, but has not gone so far as to seize their assets.
In 2012, for example, the US government sanctioned the Kunlun Bank for oil financing dealings with Iran. The bank was cut off from the global payments system, which is based on the use of the US dollar.
For economists, financial, as well as trade and technological, decoupling between the two powers is no longer an unlikely scenario.
The Trump administration continues to accuse Beijing of expansionist aims in East and Southeast Asia, of unfair trade practices, of stealing industrial and technological secrets, and of violating human rights at home and in Hong Kong.
According to Yu Yongding, a senior fellow at government think tank Chinese Academy of Social Sciences and a former adviser to China’s central bank, Washington could freeze the assets of Chinese banks that do business with Chinese leaders or officials targeted by the US government.
This could happen to financial institutions that have dealings with Hong Kong officials, like Hong Kong Chief Executive Carrie Lam. Last week, the Trump administration sanctioned them for their role in suppressing the pro-democracy movement in the former British colony.
Yu notes that Washington could also impose hefty fines on Chinese banks to have access to the dollar system.
For analysts, Beijing has few options against such a threat. Some Chinese observers suggest boosting the internationalisation of the yuan, to reduce dependence on payment systems dominated by the dollar. However, the Chinese currency’s share of international payments is only 1.76 per cent.
Another measure is turning inward, focusing on the domestic market and production, something that Chinese President Xi Jinping has already ordered, but given China’s economic interdependence with the outside world, such a plan is difficult to implement.