Beijing likely to view Russia sanctions through own prism

China is undoubtedly watching the catastrophic impact that United States sanctions is having on the Russian economy very closely. It is pondering over situations where it too might be denied access to the global banking system and contemplating alternative payment mechanisms, according to panellists at the Straits Times roundtable yesterday.

Professor Kishore Mahbubani - a veteran Singapore diplomat and distinguished fellow at the National University of Singapore's Asia Research Institute - said the coordinated Western sanctions that have severely damaged Russia's economy within a matter of days underscored the fact that the most powerful weapon that the US has deployed against Russia was not its aircraft carriers, or its strategic bombers, but the US dollar.

"I'm sure China is watching very carefully how the use of the US dollar has crippled the Russian economy significantly. And then the Chinese must be saying, 'Aha, when I have a problem with the US, they will use the US dollar. So what do I do?'", said Prof Mahbubani.

He said the use of sanctions against Russia was likely to accelerate in the next 10 years a plan by China to create international alternative payment mechanisms so that the country - the largest trading power in the world - would be able to trade with the world with or without the US dollar.

"Now, this is not possible today. And the renminbi, by the way, will not become an international convertible currency. It will not.

"So you cannot use renminbi, so you've got to find something else. And that something else, I suspect, is what China is going to look for.

"And as it builds it up, it'll be very gradual. As it builds it up using AI (artificial intelligence), using blockchain technology, whatever it is, and then when that day comes, the capacity of the United States to apply pressure on China will diminish significantly," said Prof Mahbubani.

"So which is why, I'm sure, from the Chinese point of view, every day, they must be watching what happens, and say, 'Okay, this will be done to us, to China, what do we do?' And they must be working out systematically the responses to each of these moves," he added.

Another panellist, ST Global Affairs Correspondent Jonathan Eyal, said the impact of the targeted sanctions against Russia was a clear warning to Beijing that economic prowess would not be sufficient to safeguard its economy in case America did the same to China.

"The fact that you've got national reserves of the central bank makes no difference at the end because you can't move or spend those national reserves if the United States and most Western countries impose sanctions on you. Now, this has a very fundamental and very big question mark about the international system, and how a country like Russia and China will behave within it," said Mr Eyal.