Following Beijing’s reaction to US House Speaker Nancy Pelosi’s visit to Taiwan in August, Washington has stepped up talks on sanctions options and the EU is under diplomatic pressure from Taipei to do the same, officials said. .
However, garnering support for such measures will be much more difficult than with Russia given China’s important role in the global economy. Here are some of the options and obstacles outlined by experts, diplomats and former officials:
ATTENTION TO THE “NUCLEAR OPTION
A U.S. Congressional bill outlined a series of punitive sanctions that could be imposed on China on Taiwan, including President Xi Jinping and other leaders, measures to bar Chinese banks from global markets, bans on U.S. company listings Chinese, to imports of Chinese goods and restrictions on Chinese energy projects.
However, the so-called “nuclear option” of banning all US dollar assets between US and Chinese banks, which would effectively lock Chinese institutions out of the international financial system, is considered highly unlikely, certainly in the beginning, given the damage it causes. drift could cause in the United States and in global economies in general.
DEFENSE, TECHNOLOGY AND AROSSPACE
Instead, policymakers would initially opt for less dramatic measures, such as asset freezes against Chinese officials, companies and institutions, more limited actions against certain banks, and rules prohibiting transactions for the benefit of the Chinese military-industrial complex, including semiconductor and aerospace sectors.
Craig Singleton, a former U.S. government official and sanctions expert at the Foundation for Defense of Democracies, said there may be a willingness to consider taking action against financial institutions affiliated with the ruling Chinese Communist Party, including the central bank of the People’s Bank of China and the various state banks that support trade and industry, “but the bar would be quite high”.
“I suspect many US politicians will be reluctant to take very strong action, at least before a real invasion,” he said, explaining that such action could “significantly damage the US economy.”
Asian allies are likely to be reluctant
Asian support is key to effective sanctions and it would be difficult to convince the countries of this region given their huge economic ties to China.
Most of the Asian countries, Australia, Japan, Singapore and South Korea are the exceptions, they have not gone beyond a verbal condemnation of Russia with respect to Ukraine, and “Russia is far from being interconnected with the world economy as China, “said an Asian diplomat.
“I’m not sure how realistic this threat of Russian-style sanctions is,” he added.
“The country most likely to support the US position would be Japan. But Japanese companies, even though they have tried to diversify, have so much production in China, I don’t know what they can give up quickly.”
A total of 7,486 Japanese companies had local branches in China in the year ending March 2021, just under a third of all overseas branches of Japanese companies, according to the latest survey by the Japanese Commerce Department.
“Many countries are not ready to sanction China,” said an official of an Asian ally of the United States. “We are in the early stages of developing solidarity between like-minded countries, which at the moment seems a bit symbolic and superficial.”
In the past, Beijing has taken a hard line with Asian countries following the US lead, such as when South Korea faced Chinese economic retaliation after placing a US missile defense system on its territory.
China has also taken action to reduce its dependence on imported technology and is working to develop the use of a digital currency that would allow it to circumvent bank sanctions.
“China has been aggressive in its attempt to distribute its digital currency to as many … partners as possible,” said Nazak Nikakhtar, a former senior US Commerce Department official.
“So there will be a good subset of the global trading community that will be able to circumvent any sanctions directed against China.”
Chinese leaders made it clear that they would learn from Russia’s experience with sanctions and also from then President Donald Trump’s campaign against telecom giant Huawei, which required nearly two years of sanctions and chip export bans to cause significant damage.
“Huawei accumulated US chips before the bans went into effect in an effort to protect the company from crackdown,” Singleton said. “It is almost certain that China will do the same with Taiwan – there are indications that it is already doing so – to reduce its risk exposure as US-China relations continue to deteriorate.”
THE CALL OF BIDEN
Experts such as Singleton consider “global sanctions” against China unlikely, especially since they have not yet been imposed on Russia.
A former senior US official said the decision would ultimately rest with President Joe Biden, who on a visit to Japan this year said China “is already flirting with danger” with the military pressure it has exerted on. Taiwan.
“Ultimately, mind you, this is a political decision by the president, and if he decides that we need to signal the deterrent in this way, he can say ‘go’ and the Treasury can do it very quickly,” said this person.