A prominent Chinese economist, Lian Ping, has raised concerns about the potential for financial sanctions to become a major point of conflict between the US and China. While acknowledging the low probability of full-scale sanctions, he suggests a gradual approach by the US, targeting specific entities before potentially pushing China out of the US dollar system.
Lian argues that fully sanctioning China, such as by excluding it from the SWIFT system, would be self-destructive for the US and the global financial system. He highlights China's significant role in global trade and investment, suggesting that such a move would likely lead to a shift towards China's alternative payment system, CIPS, undermining SWIFT's dominance.
These concerns arise amid growing tensions between the US and China, currently focused on trade, with fears of these tensions escalating into a financial war. Lian's remarks were published on the WeChat account of the China Chief Economists Forum.
A prominent Chinese economist has cautioned that financial sanctions and countermeasures could “become a new battleground” in China-US rivalry, while adding that the chance of Washington launching full-scale financial sanctions against Beijing remained slim.
Lian Ping, chairman of the China Chief Economists Forum, a government advisory think tank, said that although the odds of full-blown measures remain low, Washington could adopt a strategy of “first targeting specific Chinese entities, then gradually expanding the scope to eventually push China out of the US dollar system”.
His remarks, published on Thursday in a post on the think tank’s WeChat social media account, come amid growing concerns that rising China-US tensions – currently centred on trade – could spill over into a financial war.
While warning about the potential for such a conflict, Lian said it would be difficult for the US to implement the full-blown financial sanctions some fear Washington may impose on China – such as cutting it off from the Society for Worldwide Interbank Financial Telecommunication (Swift) system or freezing its US dollar assets.
“Sanctioning China within the Swift system would be akin to pulling down one of its main pillars, which would inevitably inflict serious damage on the system itself,” Lian said, citing China’s standing as the world’s largest trading nation and second-largest investor.
If the Swift system were to exclude China, countries with trade and investment ties to China would shift to using the Cross-border Interbank Payment System (CIPS) – China’s alternative for settlements – which would undermine Swift’s importance, he added.
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