Submission Statement

While the debate over their effectiveness is still far from settled, sanctions have rapidly assumed a prime position in the Western toolkit. In turn, nations that believe themselves to be at risk of being sanctioned have increasingly begun taking measures to isolate themselves from potential negative impacts. Three newly translated texts from Chinese scholars provide us insight into how China views the threat of US sanctions as well as the perceived effectiveness of the measures China is currently undertaking to “sanction-proof” its economy. Analyses of these analyses are also provided by a trio of relevant experts.

Striking similarities between all three articles include a reluctance for China to assume a hegemonic role in the global financial system or even to challenge the US dollar’s primacy in global finance. This was a surprise to me personally, as I had assumed that establishing China as a rival center of international finance would be key to Chinese sanction-proofing. However, the experts recognize the costs associated with underwriting the world economy and are therefore reluctant to sacrifice the relative freedom they have with the current renminbi. They also seem muted about financial decouplings from the US, such as the forthcoming Chinese digital currency and possible sales of US financial instruments. Rather, the authors emphasize that China’s best defense against sanctions is to increase global dependence on Chinese industry so that any sanctions would come with unacceptable economic costs. This call for further globalization in response to sanctions is encouraging, given China’s recent inwards, protectionist turn. Even if it is for self-serving reasons, greater Chinese integration with the global economy will mean a greater incentive to avoid rocking the boat on issues such as Taiwan. However, I am skeptical that this will work out as well in practice. China wishes to become more self-sufficient internally while increasing dependencies externally, all while growing more assertive on the global stage. The two goals are at cross purposes with one another–protection increases internal costs while globalization requires the cheapest goods available. Perhaps China can thread the needle, but it seems unlikely to work for long, especially as countries wise up and begin implementing protectionist measures of their own.

Karen M. Sutter is a senior analyst with over 30 years of experience working on U.S.-Asia policy issues and crosscutting economic, political, technological, and national security issues in government, business, and the think-tank community.

Michael Hirson is the former U.S. Treasury Attaché to China (2013-2016)

Meg Rithmire is an F. Warren MacFarlan Associate Professor, Business, Government, and International Economy Unit at the Harvard Business School