An article (since non-accessible in the Chinese site, but seen in the Beijing Cultural Review) entitled “Economic sanctions and international cooperation to counter them” was published in the Foreign Affairs Review - a publication run by China Foreign Affairs University.
Its author, Ye Yan (叶研) is a senior economist at the international R&D arm of China National Petroleum Corporation (CNPC) and an adjunct professor at China’s Southwest University of Political Science & Law.
1] INTRODUCTION
The international community today is in the midst of its biggest change in a century. The US and Western countries are engaged in unilateralism. Through the abuse of unilateral economic sanctions and long-arm jurisdiction, they are isolating China and countries friendly to it economically. This affects China's economic development negatively.”
“US sanctions against Xinjiang and other regions have caused significant losses to China's photovoltaic and cotton industries. At the same time, severe US sanctions against countries friendly to China, such as Iran, Russia and Venezuela, have hampered economic exchanges between China and those countries.”
“In response to these challenges, General Secretary Xi Jinping pointed out in his report to the 20th Party Congress that we should improve our national security system and establish mechanisms to counter sanctions, interference and ‘long-arm jurisdiction’ [‘长臂管辖’] on the one hand, while promoting a high level of openness to the outside world and building a new ‘dual-circulation’ economic development structure on the other.”
2] SANCTIONED DILEMMA
“When economic sanctions are imposed and counter-sanctions then implemented, there is a ‘sanctioned person's dilemma’ [被制裁者困境] in which economic sanctions are usually imposed by a stronger country on a weaker and economically more vulnerable one. If the weaker country does not adopt measures to counter these economic sanctions, its economy will be harmed. If it does adopt such measures, its isolated response will often be ineffective due to the asymmetrical nature of economic sanctions. The countermeasures taken will usually cause even more harm to the [weaker] country’s economy (and the extent of this harm may be even greater than that suffered by the country that initiated these sanctions). Thus, objectively [speaking], whether or not the sanctioned country adopts measures to counter economic sanctions, it will be put at an even greater economic disadvantage and some of the measures it adopts may even exacerbate the economic disparity [between both sides], thereby creating a ‘vicious circle’.”
3] DEFINING A STRATEGY
Defining a strategy: what China should keep in mind
“When China formulates its counter-sanctions strategy, it needs to consider the following factors fully:
First, [we] should fully recognise that there is still a gap between China and the US in terms of economic aggregates and in terms of comparative advantages in such fields as finance and tech. Therefore, China's anti-sanctions measures should be focused mainly on mitigating their impact, rather than on counterattacking [以应对措施为主,反制措施为辅], and we must endeavour to break the ‘sanctioned person’s dilemma’ [被制裁者困境].
[Comment: Ye defines ‘应对措施’ as ‘if you hit me, I’ll minimise the damage myself’ (你打我,我自行减少损害) and ‘反制措施’ as ‘if you hit me, I’ll hit you back’ (你打我,我就打你). What Ye is emphasising here is that China should currently be prioritising a softer approach over a tit-for-tat one.]Second, the US strategy of joining with its Western allies to impose an economic siege on China should be considered seriously. However, alliances with other sanctioned countries should be made with caution. China should continue to adhere to its current political diplomatic stance of ‘non-alignment, non-confrontation, and non-targeting of third parties', avoid falling prematurely [过早] into a full-scale confrontation with the US and other Western countries and leave room for flexibility in China's future foreign policy.”
“Third, [our strategy] should be based on the reality that China is not currently subject to comprehensive sanctions by the US and the West. China is only subject to US regional sanctions relating to Hong Kong and Xinjiang as well as to specific sanctions on issues such as high-tech and the South China Sea. The impact of such sanctions on China's economy is much smaller than on the economies of countries such as Iran, which have been subject to comprehensive US sanctions. The establishment of all-round cooperation to counter economic sanctions between China and those sanctioned countries will not be as significant for China's economy as it will be for theirs.”
“[Finally,] as the security-related landscape around China worsens, we cannot rule out the possibility that China will be subject to comprehensive sanctions by the US and the West. Should China [ever] be subject to such sanctions, the need for a fully fledged alliance between China and countries that are friendly [to us] will surely increase sharply. At a time when international relations are in flux, it is of high strategic importance for China to make worst-case-scenario economic arrangements [经济的底线安排] to prepare for potentially extreme situations that could occur in the future by first promoting international cooperation against economic sanctions at the corporate level [i.e. by establishing the CES network.”
The following is a summary of Ye’s argument:
Summary
· The increasing use of economic sanctions (both primary and secondary) and export controls by the US and its allies pose a threat to China’s economic development.
· The internationalisation of the RMB and boosting the development of China’s tech industry are effective countermeasures that need to be pursued, but they will not protect China in the short-to-medium term.
· Acknowledging that a power gap still exists between China and the US, Beijing should avoid adopting tit-for-tat responses to US sanctions when it can, otherwise it risks harming itself.
Ye’s solution: Building an international alliance of businesses (hereafter, CES network) that could help neutralise the impact of Western sanctions.
Members: Companies that have already been sanctioned as well as those businesses that are after a “risk premium” and that are not afraid of being sanctioned.
Dynamics: The more the West uses economic sanctions, export controls and other coercive measures, the more businesses from across the world will be encouraged to join such a network and thus the more powerful this network would become.
Advantages:
The CES network would be an inter-business, not an inter-country, alliance. This would help avoid tedious intergovernmental negotiations and the risk of diplomatic clashes.
The network would help shore up supply chains, reduce the isolation felt by sanctioned businesses and provide new opportunities for Chinese businesses to develop and prosper through trading with sanctioned entities both within China and across the world.
It would help enhance China’s global economic and political influence.
The constitution of a CES network could become a “bargaining chip” when negotiating with the US and other Western countries.
In the short term, the establishment of such a network could help prevent a complete decoupling of the US and Chinese economies.
The success of the CES network would blunt Washington’s sanctions weapon and could even lead to the collapse of the US’s global political and economic hegemony.
Disadvantages:
It would take time to develop and would initially require the strong support of governments from across the world.
Its emergence could precipitate the formation of two opposing camps. However, this would be the direct consequence of the US’s own actions (sanctions, protectionism etc.), not China’s.
Additionally: China's non-sanctioned multinational companies should be encouraged to comply with US sanctions, provided that by doing so they are not harming China's core national interests.