Cutting banks off from access to the dollar – the denomination of most of global trade – is often reserved as a last resort, as such sanctions often force banks into failure, affecting their customer and client base.
Such an action also represents a particular risk for China as the country grapples with sputtering economic recovery and growing debt.
The People’s Bank of China and the National Financial Regulatory Administration, China’s top banking regulator, didn’t immediately reply to Reuters’ requests for comments.
China and Russia have fostered more trade in yuan instead of dollar in the wake of the Ukraine war, an effort that could shield their economies from potential escalating US sanctions. The United States and other Western nations imposed sweeping sanctions on Russia’s financial system after Moscow invaded Ukraine in February 2022.
Several banks in China, the United Arab Emirates and Türkiye have boosted their sanctions compliance requirements, resulting in delays or even the rejection of money transfers to Moscow, Reuters reported in March. The delays show how US restrictions can have a strong knock-on effect.
Banks, cautious of US secondary sanctions, started to ask their clients to provide written guarantees that no person or entity from the US SDN (Special Designated Nationals) list is involved in a deal or is a beneficiary of a payment.