Roman sweetness failed to warm the atmosphere. Nor the gilding of the Cavalieri Waldorf Astoria, a 5-star hotel with a breathtaking view of the dome of Saint Peter’s Basilica. It is in this Italian palace that Jake Sullivan, the American secretary for internal security, met in the greatest discretion, Monday, March 14, Yan Jiechi, the most senior official of Chinese diplomacy. Seven hours of discussions of which almost nothing has filtered. No press conference after the meeting. No handshakes in front of the flashes of photographers around the world. Just a pithy statement from the White House leaving little doubt about the tone of the exchanges: China is exposed to “consequences” if it comes to help Moscow to compensate for the losses due to Western sanctions. Worse, if it were proven that Beijing delivers arms to its communist neighbor. Each word is weighed in the trebuchet. And behind the term “consequences”, we must read the thinly veiled threat of retaliation.
Since the start of the conflict, Westerners have been wielding economic weapons like never before to make Vladimir Putin bend. A carpet of financial bombs: tracking down oligarchs, embargo on certain supplies, isolation of large banks, freezing of foreign currency assets… But Beijing is not Moscow. If Russia is an essential link in the planetary energy chain, China is the lung of the world economy, with a gross domestic product 6 times greater than that of Russia. China is also the first trading partner of the United States; also Uncle Sam’s main source of imports. Shenzhen factories produce a large part of the televisions, computers, electronic gadgets, sneakers, toys and machine tools sold all over the planet. And especially in Europe. This is the great lesson of the Covid: when the automotive subcontractors in Wuhan cough, the Renault and PSA factories in Flins and Sochaux catch a cold. The art of threat is a subtle discipline. So can we seriously imagine punishing Beijing as we have been doing for nearly a month with Moscow?
“If it turns out that China is really helping Russia militarily, many of the economic sanctions that appear difficult today will become possible: European public opinion will feel attacked by a bloc worthy of the Axis. The perception of economic pain is relative”, wants to believe, François Godement, historian, sinologist and adviser to the Institut Montaigne.
It is still necessary to choose from the panoply of the most effective tools available. It’s hard to imagine Europe and America embarking on a trade war with prohibitive customs duties and embargoes without risking losing a lot of feathers. “To isolate China economically is to turn your back on globalization, it’s unthinkable,” argues Barthélémy Gourmont, research director at IRIS. In recent years, Donald Trump has indulged in it, with more than mixed results. Admittedly, Beijing agreed to sign a gigantic trade agreement in February 2020, promising to buy nearly 200 billion additional dollars of “Made in US” products over two years to rebalance bilateral trade. Results of the races: two years later, China has not respected any of its commitments, as revealed by a study by the Peterson Institute.
A barbaric tool: the extraterritoriality of American law
Better than the stick of trade sanctions, the weapon of law that Washington wields wonderfully, could be much more formidable. On the table: the so-called “primary” sanctions which can hit companies or private individuals, prohibited from sourcing from the United States and using the dollar. “But it is the so-called secondary sanctions that are the most pernicious,” dissects lawyer Olivier Dorgans, a partner at Ashurst. Because, the latter can affect any entity on the planet, from the moment it markets a product in which a component or even a Lilliputian service made in the United States has been integrated into it. In 2017, the Chinese electronics giant ZTE experienced this: for having continued to work with Iran, the group found itself banned from the American market overnight and ordered to pay a fine of 1 billion dollars so as not to see all of its American assets frozen. A precedent that has left its mark. “However, the Defense Department has already concocted a list of a hundred Chinese groups, particularly in Tech, accused of having developed technologies used by the Chinese army to subdue the Uyghur and Hong Kong opposition,” explains Alicia Garcia Herrero, Chief Economist at Natixis in Hong Kong. In the line of sight: Semiconductor Manufacturing International Corp (SMIC) the leader in semiconductors but also China National Offshore Oil Corp (CNOOC), the oil major or China International Engineering Consulting Corp (CIECC) an engineering giant. Problem, even if Chinese Tech is very powerful, it does not have the means to cut itself off from the West both to sell its products and to source components.
Finally, there remains the ultimate weapon, the freezing of central bank reserves. “This is the counter-attack that Putin had not anticipated, unheard of in history”, observes Sébastien Jean, professor at the CNAM. In a snap, Moscow found itself unable to use almost half of its war chest. However, since the Asian crisis of 1997, most emerging countries, China in the lead, have built up huge foreign exchange reserves intended to protect them in the event of bad weather. Those of the Central Bank of China are the largest on the planet, exceeding 3000 billion dollars, three-quarters of which are denominated in greenbacks and euros. Except that unlike Moscow, Beijing has also become the banker of the West, by buying dump trucks of public debt securities issued by American and European governments. But these emissions should soar under the effect of massive recovery plans and Western rearmament. An interdependence on which Beijing will not hesitate to press. After all, General Sun Tzu, the author of the art of Warwas Chinese.