Is US preparing for sanctions against China over support of Russian war?

The United States is preparing to impose fresh sanctions on a few Chinese institutions in an effort to stop Beijing from funding and supporting Russia’s war in Ukraine. The proposed sanctions coincide with this week’s scheduled visit to China by US Secretary of State Antony Blinken.

Regarding Beijing’s facilitation of exports to Moscow, Washington has been putting more and more pressure on Beijing. If China does not respond to negotiations, Washington sees sanctions as an escalation of the situation.

Sanctions threats might be sufficient to put pressure on Beijing. Prior threats from Washington to impose sanctions on Chinese financial institutions were sufficient to influence Beijing’s actions. Bottlenecks on trade between China and Russia were caused by an executive order signed by US President Joe Biden that authorized sanctions on any bank that supported the Russian military.

Chinese banks withdrew from supporting transactions that would have resulted in sanctions out of fear of retaliation. However, this threat has lessened recently as more transactions between Russia and China are being conducted through smaller banks that do not utilize the US currency and are therefore immune to sanctions. Chinese and Russians alike are always adjusting to changing circumstances.

China also faces the threat of sanctions from Group of Seven nations, G7, if it carries out military provocations in Taiwan. Beijing has been preparing for such a scenario, an Atlantic Council report noted, and has created some safeguards.

As an added precaution against potential punitive measures, China is establishing financial networks that are dominated by the yuan rather than the US dollar. A burgeoning quantity of local and cross-border payment initiatives are being designed with the potential for Western sanctions in consideration. Beijing is unlikely to retaliate to penalties with similar measures. Rather, it intends to specifically target industries in which it may do disproportionate harm, especially by imposing trade restrictions or export limitations on essential commodities like rare earths.

Chinese businesses have established facilities and logistical centres in northern Mexico in an effort to get around US taxes or sanctions on their goods. Given that there are no indications that the US-China trade conflict will end soon, this pattern may persist for a while. According to international trade laws, those products are, in essence, Chinese-made, even though their provenance may make some national policies uncomfortable.