China-backed financial channels challenge US sanctions power, analysis says
A South China Morning Post analysis argues that China’s payment networks and multilateral institutions are giving governments alternatives to dollar-based finance. It says the dollar remains dominant, but the growing use of yuan settlements and CIPS could reduce Washington’s ability to enforce sanctions.
China’s financial institutions and payment networks are creating alternatives to the dollar-based system that has supported US sanctions, according to an analysis published by the South China Morning Post. The analysis links the shift to the expansion of China-backed multilateral organisations and the use of yuan-based transactions by countries seeking to avoid US financial restrictions. It argues that Beijing’s influence is growing as other governments hedge between Western and non-Western systems.
The Shanghai Cooperation Organisation’s recent summit in Bishkek produced 27 documents and a declaration criticising US and Israeli military strikes on Iranian territory, according to the analysis. The 11-member Brics group later adopted a declaration calling for restraint in the Middle East and opposing unilateral sanctions not authorised by the United Nations Security Council. China’s Asian Infrastructure Investment Bank was presented as a central part of the emerging architecture.
The article says the bank, launched in 2016, has 111 approved members and approved almost $70bn for 361 projects across 40 countries during its first decade. The analysis also points to China’s Cross-Border Interbank Payment System, or CIPS. It says the system reported average daily transaction volume of $134bn in March, while payments for Iranian oil were made in yuan through the Bank of Kunlun and CIPS, or in cryptocurrency.
These arrangements, it argues, can keep transactions outside the Swift network and reduce exposure to US financial monitoring. The dollar remains the leading global currency, the article says, but its influence as a sanctions instrument is weaker when workable alternatives are available. It cites economist Paul Krugman, who argues that alternative payment systems have accelerated the erosion of US financial leverage.
The analysis says countries including Turkey and the United Arab Emirates are considering closer use of Chinese financial channels while retaining Western ties. It also identifies Hong Kong’s offshore yuan clearing system as a practical link between competing financial networks. The article presents the change less as evidence of China drawing countries into its orbit than as a reaction to Washington’s policies.
It argues that US unilateralism has encouraged governments to diversify their payment options, while acknowledging that the dollar continues to dominate international finance.
This independently written report is based on information supplied by the named publisher. Vertrix News has not independently verified the source report.