During Putin’s recent trip to Beijing, although there were some costs incurred, the most significant gain was receiving full support from the Chinese Communist Party (CCP) to Russia and publicly declaring joint resistance against the United States. The statement clearly mentioned that China and Russia will enhance coordination to “counter the non-constructive and hostile ‘dual containment’ policy of the United States.”
The joint statement also included a provision stating, “Both sides believe that based on the basic principles of international law of equal sovereignty of states, strict compliance with international obligations regarding exemptions enjoyed by countries and their properties (including sovereign reserves) must be upheld. Both sides condemn attempts to confiscate foreign assets and properties and emphasize that victim countries have the right to take countermeasures in accordance with international law. Both sides are determined to protect each other’s national properties in their respective countries and ensure the safety, inviolability, and timely return of the other party’s national properties temporarily transferred to their country.”
The implication of the provisions is that both China and Russia are concerned about the confiscation of their assets in the West. They have provided guarantees for the security of each other’s assets in the other party’s country.
Why include such provisions in the statement? For Russia, which has already had its assets confiscated, it serves as a warning to the United States and Europe. For the CCP, it is a precautionary measure.
Back in February 2022, shortly after Moscow’s invasion of Ukraine, the United States not only removed selected Russian banks from the SWIFT system, sanctioned individuals and entities in Russia, but also froze around $300 billion worth of Russian assets overseas, with the majority located in EU countries, particularly Belgium, and about $5 billion in the United States. Since then, discussions have been ongoing on how to utilize these Russian assets overseas.
On May 8 of this year, President Biden signed an executive order allowing the U.S. government to seize Russian state-owned assets in the U.S. for a large aid package to Ukraine and other allied countries. This signifies that an additional $5 billion in aid, coming from Russia, will be provided to Ukraine, subject to approval by other G7 member countries and the EU.
The U.S. move is not without precedent. In February 2022, Biden signed an executive order freezing assets of the Central Bank of Afghanistan and using half of the assets for compensation to victims of the “9/11” attacks.
On the same day Biden signed the order allowing the use of Russian assets to aid Ukraine, the EU reached a temporary agreement to utilize the proceeds from frozen Russian assets to assist Ukraine. According to the agreement, 90% of the proceeds from frozen Russian assets will go into a EU-managed Ukrainian military aid fund, while the remaining 10% will support Kyiv in other ways. This agreement will provide up to $3.2 billion annually for Kyiv.
Naturally, Russia is enraged by these actions. Russian authorities warn the United States and Europe that such moves will disrupt the global financial system, and they are preparing to challenge the legality endlessly. Russia even considers downgrading its diplomatic relations with the U.S. However, the U.S., which has always believed that all options can be put on the negotiating table, is not intimidated by Russia’s warnings and threats. It is evident that the financial sanctions on Russia have directly led to a significant outflow of its foreign capital, a sharp devaluation of the ruble, and massive capital flight. If it were not for the continuous support from China, the Russia-Ukraine war could not have lasted this long, and the Russian economy would have struggled to sustain itself.
With China openly standing with Russia against the U.S. after disregarding Europe and U.S.’s repeated warnings not to support Russia militarily for over two years, the only choice for the U.S. and Europe for their own and global security is to no longer place hopes on China but to take strong measures, strike at the root, and contain China. This may include kicking Chinese banks out of SWIFT and confiscating Chinese officials’ overseas assets.
In fact, the U.S. has been laying the groundwork for future sanctions against China since 2022. In April of that year, the U.S. House passed a bill titled the “Assessing Xi’s Interference and Subversion Act” with an overwhelming vote in favor, proposing an assessment of how Xi Jinping intervened and obstructed U.S. sanctions against Russia.
In March of this year, the U.S. House committee just passed the “Sanctioning China Act,” which imposes financial and visa sanctions on Xi Jinping, members of the CCP Central Committee, and their adult relatives. Sanctions include asset freezing, visa revocation, and the suspension of any possible benefits.
In April, Bill Gertz, a senior media figure staunchly anti-Communist and closely affiliated with the U.S. military, revealed that U.S. intelligence agencies are compiling a report on high-level corruption and hidden wealth within the CCP, including the CCP leadership and the seven Politburo Standing Committee members. With the intelligence capabilities of the U.S. and its Western allies, they likely hold substantial information on corruption among top Chinese officials and their overseas assets.
The Chinese authorities are aware of the U.S.’s “hostility” and are attempting to evade sanctions by promoting yuan settlement, allowing state-owned banks to circumvent restrictions, protesting against U.S. “anti-corruption” efforts, and shifting assets to other countries. Now, by mentioning the attempted confiscation of assets by other countries in the joint China-Russia statement, it is evident that the CCP is well aware that with the continued unity of China and Russia against the U.S., sanctions from the U.S. and Europe are on the way and will inevitably address fundamental issues. Especially in the event of a serious conflict like in the Taiwan Strait, similar to sanctions on the central bank, such measures as restricting the use of the U.S. dollar and cutting off the SWIFT system will be significant deterrents jointly implemented by the U.S. and allies.
So, when the day comes for the public freezing of Chinese overseas assets (such as purchasing U.S. treasuries) and the freezing of assets of Chinese elite families, along with the expulsion of some Chinese banks from the SWIFT system, how will the top leaders in Zhongnanhai (Chinese political leadership compound) react? What kind of internal unrest will occur within the CCP? How much confidence does the CCP have to challenge the West? After all, challenging the West requires substantial strength.
Clearly, while the U.S. is targeting China on multiple fronts, it is preparing to seize control over the top leadership of the CCP. Once the U.S. unleashes its powerful tool, the already shaky CCP leadership will undergo significant changes.