BEIJING, Oct 20 (Reuters) – A war with the United States over Taiwan would require China to build a global network of companies under U.S. sanctions, seize American assets within its borders and seize gold-denominated bonds, according to the Chinese government spend. affiliated researchers examine the West’s response to Russia after its invasion of Ukraine.

The sanctions against Moscow have prompted hundreds of Chinese economists, financiers and geopolitical analysts to consider how China should mitigate extreme scenarios, including loss of access to U.S. dollars, according to a Reuters review of more than 200 Chinese-language policy papers and academic articles published since February 2022.

“With the intensifying strategic competition between China and the US and the conflict in the Taiwan Strait, we should be wary of the US repeating this financial sanctions model against China,” wrote Chen Hongxiang, a researcher at a branch of the People’s Bank of China (PBOC). ) in the eastern province of Jiangsu.

China, he said, should “prepare for a bad day” to ensure its financial and economic stability.

Reuters is reporting for the first time on the specificity of the scenarios and possible countermeasures.

In assessing Russia’s experience, many researchers warn that a sanctions battle with the West could be far more destructive because of China’s much larger economy and its dependence on advanced foreign technology and raw material imports. Some reiterated the view that greater interdependence might be a better approach than pulling up the shutters.

Senior US military officers said Chinese President Xi Jinping has ordered the People’s Liberation Army to prepare for an invasion of Taiwan by 2027. Beijing did not rule out using force to take the island but never provided details of war preparations.

According to research by the China National Knowledge Infrastructure, discussions of US sanctions, including by researchers within China’s foreign and financial policy establishment, increased by 50% in the 12 months after the start of the war in Ukraine compared to the corresponding period a year earlier , the country’s largest database of scientific literature.

“Analyzing various possible scenarios and developing China’s prevention, response and countermeasures are undoubtedly top priorities for China’s policymakers,” Yu Yongding, an economist and former central bank adviser, wrote in a July 2022 journal article.

Reuters contacted all researchers mentioned in this story directly or through their institutions, but most declined to comment or did not respond. Yu referred Reuters to an op-ed he wrote about decoupling.

The PBOC said in a statement that the research papers written by its employees reflect their personal views. The central bank did not respond to questions about its sanctions planning.

China’s State Council Information Office did not respond to inquiries about Beijing’s emergency planning.

Looking for Moscow

The Russian Central Bank’s freeze of more than $300 billion in foreign exchange balances and the removal of Russian banks from the SWIFT interbank payment system last year particularly concerned Chinese experts, given China’s foreign exchange reserves of more than $3 trillion and its export-dependent economy worried.

“The risk of China’s foreign reserves being frozen appears to be greater,” wrote Wang Yongli, managing director of China International Futures, one of the country’s largest commodities and financial futures brokerage firms.

Wang and several PBOC researchers wrote in articles that Beijing should freeze U.S. investment and pension funds and seize the assets of U.S. companies if the U.S. imposes Russia-like sanctions on China. Individual companies were not named as potential targets in the papers.

Researchers have also formulated unconventional solutions to China’s dependence on the US dollar, inspired in part by Moscow’s policies.

The Beijing-based China Center for International Economic Exchanges (CCIEE), whose leaders include former trade ministers, published several analyzes on lessons China should learn from Russia.

Sun Xiaotao, a CCIEE researcher, published an article in February arguing that China should push for more gold trading to prevent major fluctuations in the yuan – echoing the Russian central bank’s decision to increase its gold reserves since Ukraine -War began to increase by a million ounces.

Reuters could not determine the extent to which the think tanks influence decision-making in China, but they are known to brief and write reports for senior officials.

Some of China’s policies are consistent with newspaper recommendations. Central bank data in early October showed that the PBOC increased its official gold reserves for the eleventh consecutive month.


In addition to financial sanctions, Russia’s response to Western pressure on its oil, gas, metals and chip industries has given Chinese researchers pause.

Mou Lingzhi, a scholar at the Shanghai Academy of Social Sciences, wrote in January that Russia’s demand to pay for its natural gas in rubles should prompt China to promote yuan pricing for raw materials such as lithium, which is crucial for electric vehicles is to accelerate batteries.

Central bank researchers have taken up this point. One from a PBOC branch in the island province of Hainan, Xia Fan, wrote last November that China should “accelerate the process of international energy settlement in yuan” to weaken the dollar’s dominance in the oil market.

Researchers at China Minmetals Corporation, one of the country’s leading mining companies, wrote in June that contingency plans were needed to ensure supplies of iron, copper, nickel and other strategic metals, noting that Russian nickel products were withdrawn from the London Metal Exchange for this reason suspended as a result of the war in Ukraine.

Other researchers called for a new economic grouping that could protect China in a confrontational course with sanctions.

Ye Yan, an economist at the China National Oil and Gas Exploration and Development Company, wrote in January that the cheaper Russian oil that China is enjoying because of Western sanctions has created a model for a future “anti-sanctions business network.” This would enable member countries to trade in discounted goods.

Chinese researchers also suggested that Beijing is exploiting fissures within the European Union and between the United States and its allies. A foreign analyst said there may be a lack of unity in the West.

“It would be orders of magnitude more difficult to achieve broad international consensus for a sanctions coalition against China than it would be for Russia, because it has much more investment and is reliant on its market,” said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics in Washington.


Some analysts have highlighted the limits of yuan internationalization, arguing instead that China should ease sanctions by strengthening its economic ties with the US and its allies.

Yu, the former PBOC adviser, wrote in his 2022 paper that it was unlikely that the US would seize trillions of dollars or refuse to pay principal and interest on government bonds held by China.

“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 substitute for dollar reserves because of the costs and risks associated with transporting and storing large amounts of the metal.

Given these problems, many researchers suggest that Beijing further opens up domestic financial markets to align the interests of the United States, its allies, and companies from these countries with China, increasing the costs of sanctions.

Partly in response, the EU and US have sought to decongest and diversify chip supply chains and on-shore production. However, it will take time for these measures to bear fruit, Chorzempa said.

“China’s much more pronounced role in global value chains would also give it more opportunities to circumvent (sanctions), and its ability to replace domestic production with foreign technology is far stronger than Russia’s,” he said.

Chen, the PBOC researcher, considered the “nuclear” option of China exiting SWIFT and concluded that increased cooperation with the US was the best way to protect China.

“The interpenetration of the Chinese and American economies will inevitably weaken the willingness to impose financial sanctions,” he wrote.

Reporting by Eduardo Baptista; Editing by David Crawshaw

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