US Treasury: Chinese Major Banks to Face Sanctions if Violating Russia Sanctions

China Restricts Banks Involved in Sino-Russian Trade
China Criticizes 'Overproduction'

U.S. Treasury Secretary Janet Yellen said on the 13th (local time) that sanctions on major Chinese banks are also being considered if there is organized violation of sanctions against Russia.

According to Bloomberg News, after delivering a speech at the New York Economic Club that day, Secretary Yellen told reporters, "I believe major Chinese banks have a very strong incentive not to be designated for sanctions violations."

Janet Yellen, U.S. Secretary of the Treasury
[Photo by EPA Yonhap News]

However, Secretary Yellen emphasized, "I cannot say that we will not designate major banks if organized violations are found."

Secretary Yellen said the biggest concern is small Chinese banks. After Western financial institutions withdrew from Russia following the Ukraine war, there has been speculation that small banks in the China-Russia border region have been involved in China-Russia trade through so-called 'underground finance' or cryptocurrency payments. There were also reports last year that Chinese state-owned banks supported Russia and aimed to expand yuan international trade settlements.

As warnings against small Chinese banks are expected at the upcoming Group of Seven (G7) summit starting that day, measures have now extended to include major banks as well.

The day before, the U.S. Treasury Department added over 300 individuals and entities to the sanctions list for aiding Russia's conduct of the Ukraine war and evading existing sanctions. The list included Chinese state-owned enterprises.

In her speech that day, Secretary Yellen pointed out that China’s 'overproduction' is unacceptable. She said, "If China continues down this path, I worry that China’s policies could hinder the United States’ efforts to build sound economic relations," citing electric vehicles, batteries, and solar energy equipment as sectors where the Chinese government has led overproduction through subsidies.

She added, "President Joe Biden and I reject the idea that 'decoupling' (supply chain separation) in any form would benefit the U.S. economy," and said, "At the same time, potential benefits in economic relations can only be realized if there is a level playing field for fair competition."

Meanwhile, as G7 leaders agreed to provide $50 billion to Ukraine from frozen Russian assets, Secretary Yellen proposed in a New York Times (NYT) op-ed a plan to support Ukraine with interest-free loans funded by earnings from Russian assets frozen in European banks.