Economist considers US sanctions threats against China unconvincing
Shanghai-based independent economist Andy Xie believes that US threats to impose sanctions against China over Beijing’s relations with Iran are unconvincing. In a column for the South China Morning Post, he argues that the United States’ financial vulnerability could restrain Washington from actions capable of causing a shock to its financial system.
Sanctions and yuan payments
According to Xie’s assessment, the United States has imposed economic and financial sanctions against Iran for decades and now seeks to introduce secondary sanctions against its trading partners. Since China is Iran’s main trading partner, such measures would effectively target Beijing, the economist writes.
The author suggests that even disconnecting major Chinese institutions from SWIFT — the global financial messaging system that facilitates cross-border payments in dollars — could accelerate the yuan’s spread. In his view, China’s trading partners may switch to the Cross-Border Interbank Payment System, CIPS.
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Assessment of economic resilience
Xie notes that after the start of the trade and technology confrontation during US President Donald Trump’s first term, China faced a major real estate bubble and an inflated shadow banking system. In the author’s view, Chinese authorities managed to ease these imbalances without a significant economic downturn, and the Chinese economy is now capable of withstanding shocks despite restrained growth rates.
At the same time, the economist calls the bubble around artificial intelligence and the stock market, as well as rising public debt, risks for the United States. He writes that US stock market capitalization reached 240% of GDP, while total public debt exceeded $40 trillion. According to his data, the country needs to refinance $9 trillion in bonds and raise another $2.1 trillion to cover the deficit. Xie also notes that bond yields have risen to 2007 levels and concludes on this basis that the United States is unlikely to initiate financial actions against China that could harm its own financial system.
