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To defeat U.S. sanctions, China must turn to gold, researchers say

Section: Daily Dispatches

China Weighs Options to Blunt U.S. Sanctions in a Taiwan Conflict

By Eduardo Baptista
Thursday, October 19, 2023

BEIJING -- In a war with the United States over Taiwan, China would need to create a global network of companies under U.S. sanctions, seize American assets within its borders, and issue gold-denominated bonds, according to Chinese government-affiliated researchers studying the Western response to Russia after its invasion of Ukraine.

The sanctions against Moscow have prompted hundreds of Chinese economists, financiers, and geopolitical analysts to examine how China should mitigate extreme scenarios, including loss of access to U.S. dollars, according to a Reuters review of more than 200 Chinese-language policy papers and academic articles published since February 2022.

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"In the context of intensified Sino-U.S. strategic competition and the Taiwan Strait conflict, we should be wary of the U.S. replicating this financial sanction model against China," wrote Chen Hongxiang, a researcher at a branch of the People's Bank of China in eastern Jiangsu province.

China, he said, should "prepare for a rainy day" to ensure its financial and economic stability.

The specifics of the scenarios and potential countermeasures are being reported for the first time by Reuters. ...

The Beijing-based China Center for International Economic Exchanges (CCIEE), which counts former commerce ministers among its leaders, published several analyses on lessons China should learn from Russia.

Sun Xiaotao, a CCIEE researcher, published an article in February that argues China should push for more gold-denominated trade to prevent major fluctuations of the yuan -- echoing the Russian central bank's decision to increase its gold reserves by one million ounces since the Ukraine war began.

Reuters could not determine the extent to which the think tanks influence China's decision-making, but they are known to brief and write reports for leading officials.

Some of China's policies align with the papers' recommendations. Central bank data earlier in October showed the PBOC increased its official gold reserves for the 11th consecutive month. ...

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