Yellen threatens to impose sanctions on China’s banks that helped Russia in the war

“I emphasized that companies, including the PRC, should not provide material support for Russia’s war, and if they do “So they will face significant consequences.” , using an abbreviation for the People’s Republic of China.

“Any banks that facilitate significant transactions that send military or dual-use goods to Russia’s defense industrial base put themselves at risk of US sanctions,” he said.

The Biden administration is trying to crack down on companies around the world that help Russia evade sanctions that the US and its allies have imposed on Moscow since its 2022 invasion of Ukraine. While China has been the target of previous warnings, Yellen’s Monday message, delivered in the Chinese capital, was unusual because of the direct threat of sanctions.

It came on the day Russian Foreign Minister Sergei Lavrov arrived in Beijing to discuss Ukraine and other issues. While China states its position on the war as neutral, trade with Russia has increased since the war began.

“China and Russia do a lot of trade and most of it is non-problematic,” Yellen said in an interview with CNBC. To approve it.”

Read more: China is providing geospatial intelligence information to Russia, America warns

The US’s ultimate weapon against financial institutions is the Treasury’s ability to cut off their access to US dollars, a potential threat to any bank operating internationally.

That such a threat now looms over Chinese lenders is another example of how the two superpowers are increasingly finding themselves on opposite sides of geopolitical and economic fault lines – even to Yellen, Which is also pushing the least aggressive among senior Biden administration officials who deal directly with China. Get aggressive.

For much of his visit, the Treasury chief has been busy scolding China about something else: Washington accusing it of overinvesting in manufacturing, especially in new green-energy technologies, to offset its troubled property sector and weak domestic demand. Sees as. Yellen’s message is that if nothing changes, China’s overcapacity will overwhelm other economies.

This topic has dominated since day one, and it was repeated repeatedly during the weekend talks, which both sides described as frank and constructive. According to senior Treasury officials, the Chinese played the role of gracious hosts and never retaliated angrily, even in closed-door meetings.

Beijing has acknowledged that there is excess capacity in at least some industries, although it also accuses the US and other countries of trying to protect their less competitive companies.

According to Christopher Beddore, deputy research director for China at Gavekal Dragonomics, the US has some influence on such matters right now, because China’s economy is fragile and its leaders realize that many other countries agree with Yellen.

“That’s why even though Yellen is making tough comments, they’re not stopping her,” he said.

Yellen returned to the issue after meeting with Chinese central bank chief Pan Gongsheng on Monday.

“I am particularly concerned that China’s enduring macroeconomic imbalances – namely its weak domestic consumption and overinvestment in trade, exacerbated by massive government support of specific industrial sectors – are affecting workers in the US and the rest of the world and Will pose significant risks to businesses around the world,” she said.

Treasury officials said Yellen specifically urged China to do more to stimulate domestic demand. The Chinese responded by assuring Yellen that they had already taken steps in that direction, he said. They also agreed to launch a new set of talks focused specifically on “balanced growth in the domestic and global economies”, a euphemism for addressing China’s over-investment in supplies.

Yellen announced that new talks would begin with a meeting between two US-China working groups in Washington next week.

-With assistance from Lucille Liu and Jacob Gu.

(Updates with further Yellen comments in sixth paragraph.)

More stories like this are available on Bloomberg.com

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Published: 09 April 2024, 03:04 am IST