China Has Financial Nuclear Bombs If U.S. Enforces Sanctions
CHINA - After watching the U.S. place a freeze on Russian central bank assets, and place harsh sanctions on the country, China has said that if the West places similar sanctions on them, China has 'financial nuclear bombs'.
Wang Yongli, a former Vice President with the Bank of China, as well as a former board member for Swift has said that the huge foreign exchange reserves are China's financial nuclear bombs with a powerful deterrent effect.
The South China Morning Post (SCMP) quoted Yongli as saying, "It is necessary to speed up the construction and external connection of the cross-border yuan clearing system CIPS … [But] the primary choice is to continue to strengthen cooperation with Swift".
Yongli also said that "The huge foreign exchange reserves are hard-won, and they are China’s ‘financial nuclear bombs’ with a powerful deterrent effect. It must be used properly rather than arbitrarily, and cannot be easily slashed".
China has the second-largest economy in the world, second only to the United States. Although the U.S. economy would be greatly affected by hefty sanctions on China, the Chinese economy which is also highly dependent upon global trade would also likely be crippled.
The fact that the Chinese economy would be impacted in such a way makes it unlikely that China would decide to sever economic ties so long as the country is largely dependent on global trade.
China and Russia however have both been working on ditching the dollar and implementing a new 'financial alliance' with one another to reduce both countries' dependence upon global trade and the U.S. Dollar.
If the two countries do succeed with their plans on reducing their economy's reliance on the rest of the world, the effectiveness of economic sanctions on either country will be largely reduced.