China’s Contingency Plans to Mitigate U.S. Sanctions in a Taiwan Conflict
China’s Potential Countermeasures
In the event of a conflict with the U.S. over Taiwan, Chinese researchers affiliated with the government propose several strategies to counter U.S. sanctions. These include creating a global network of companies under U.S. sanctions, seizing American assets within China, and issuing gold-denominated bonds. These findings, based on a review of over 200 Chinese-language policy papers and academic articles, highlight China’s efforts to prepare for extreme scenarios and safeguard its financial and economic stability.
Lessons from Russia
Chinese researchers closely analyze Russia’s response to Western sanctions following the invasion of Ukraine. They caution that due to China’s larger economy and dependence on advanced foreign technology and commodity imports, a sanctions battle with the West could be significantly more destructive. However, some researchers argue that increasing interdependence rather than isolating China could be a more effective approach.
Wary of Financial Sanctions
Researchers within China’s foreign and financial policy establishment have witnessed a surge in discussions about U.S. sanctions since the start of the war in Ukraine. They emphasize the importance of analyzing various scenarios and formulating prevention, response, and countermeasures to mitigate the impact of potential financial sanctions imposed by the U.S.
Unconventional Solutions
To address China’s dependence on the U.S. dollar, researchers propose unconventional solutions inspired by Russia’s policies. They suggest increasing gold-denominated trade to stabilize the yuan and diversify China’s foreign exchange reserves. Some of these recommendations align with China’s current policies, such as the continued increase in official gold reserves.
Energy and Alliances
Chinese researchers also examine Russia’s response to Western pressure on its oil, gas, metals, and chips industry. They recommend accelerating the promotion of yuan pricing for commodities such as lithium to reduce reliance on the dollar. Additionally, there is a call for emergency plans to guarantee supplies of strategic metals and the formation of a new economic grouping to protect China in a sanctions tit-for-tat. Exploiting divisions within the European Union and between the U.S. and its allies is also seen as a potential strategy.
Seeking Solutions
While some analysts suggest increasing economic links with the U.S. and its allies to blunt sanctions, others argue that the mutual penetration of the Chinese and American economies will deter the U.S. from imposing severe financial sanctions. They believe that further opening China’s domestic financial markets and aligning the interests of the U.S., its allies, and Chinese companies can increase the costs of imposing sanctions on China.
The insights and recommendations provided by Chinese researchers highlight the importance of proactive measures to mitigate the impact of potential U.S. sanctions. By analyzing Russia’s experience and formulating comprehensive strategies, China aims to ensure its financial and economic stability in the face of escalating Sino-U.S. strategic competition and the Taiwan Strait conflict.
