Chinese banks can’t easily circumvent sanctions
In the Editorial of your April Magazine you noted that, while professing to hold the line of neutrality on the Ukraine war, China has distanced itself, abstaining in United Nations’ votes and constantly liaising with US officials on how to prevent escalation.
Many other media reports about the Ukraine crisis have suggested that China and Russia are on the same side, presenting them as two authoritarian regimes pitted against democracy. The reality is more nuanced, as the excellent editorial and other articles in your April edition highlight.
Although China’s politicians rankle at the idea of sanctions, Chinese banks usually conform with them, such as by following rules laid down by the US Office of Foreign Asset Control. Institutions in China adhere to them for the same reason as banks from most other countries – fear of being excluded from the dollar market. Four of the largest Chinese banks complied with US sanctions against Iran and North Korea and even helped impose punishments on officials from Hong Kong who carried out Beijing’s instructions to impose harsh new security laws in the city.
Another irony is that, although China claims to appreciate Russia’s security concerns about NATO’s eastward expansion, the Ukraine situation may actually strengthen the western alliance. Several countries now wish to join NATO, including Sweden, Finland and Serbia. In the face of the Ukraine invasion, Germany has agreed to modernise its army, export military equipment and raise its overall defence budget. I cannot believe this is an outcome which will be welcomed by either China or Russia.
Chief Market Strategist
Bannockburn Global Forex
First Financial Bank
China’s waiting to gain more power in Russia
Thank you for the incisive and balanced pieces on the ongoing Russia-Ukraine crisis in Asian Affairs’ April edition. A Chinese Proverb states that “patience is power, for in time, a mulberry leaf turns to silk.” It strikes me that China’s leaders are exercising patience in relation to the war in Ukraine. They are waiting to see if the Western Alliance will hold together throughout this conflict, however long that takes. If the west grows weary, as a result of the economic cost and rising price of energy, then it may be weakened. If this proves to be the case, China may thus present its model of governance as an alternative to Western ideology.
If Putin is successful in the face of western sanctions, he will prove himself a strong partner for China. However, if Mr Putin’s campaign fails, which I see as the more likely scenario, a weak Russia could be manipulated by China. It could offer the Chinese military use of its northern ports, as well as access to sensitive military technology, including advanced nuclear weapons, as well as nuclear submarines. If Putin is removed from power, China could then insert another leader into Russia. In this case, China would greatly increase its influence over Russia and Europe.
Jeffrey J. Hummel
Washington, United States
Sri Lanka thanks Asian nations for their support
Your reporter Neville de Silva has been very committed in highlighting the serious political and economic problems facing Sri Lanka (Rajapaksas on the Ropes, April 2022). There is considerable anger over the failings of our leaders, with many of the poorest people in society facing abject poverty. In the face of such problems, this is a time when Sri Lanka appreciates support from its Asian friends. It is encouraging that the government of India recently agreed to give Sri Lanka an additional $500 million in financial assistance to buy fuel. There are also media reports that Bangladesh is willing to postpone $450 million in swap repayments to ease the debt burden. The government has also received extensive loans from China, although recently, the Chinese have encouraged us to turn to the IMF for more help.
The problem is that assistance from the IMF may not be forthcoming for many months. How will we find the funds to keep our people supplied with essentials in the meantime? Furthermore, the IMF package, if it comes, will be an austerity package. The key obligation now is to support the most vulnerable households. For that, we are grateful to other Asian nations for helping out, even though they face their own problems due to soaring global inflation.
Colombo, Sri Lanka