Geopolitics is back, after comments by the US Treasury Secretary overnight that exude confidence while drawing a line in the sand. finews.asia looks at what banks need to worry about.
The speech had a bit of carrot and a great deal of stick. It flattered and warned, admitting imperfection while emphasizing strength. And it had one clear message.
Economic interests take a backseat to American national security interests when it came to its relationship with China, US Secretary of the Treasury Janet Yellen emphasized in wide-ranging comments Thursday at John Hopkins School of Advanced Studies.
She also went against the conventional wisdom, particularly prevalent in Asia, that the actions were meant to gain a competitive advantage or contain China. It also comes on the heels of what is seen as a widely controversial visit to China, at least in the Anglo-Saxon world, by French President Emmanuel Macron.
Straightforward Considerations
«Even though these policies may have economic impacts, they are driven by straightforward national security considerations. We will not compromise on these concerns, even when they force trade-offs with our economic interests,» she said.
As evidence of that, she indicated that any actions will be narrow in scope and have clear objectives. They will be easily understood, enforceable, and adaptable and avoid unintended consequences.
It also means that money doesn’t come first, something that many in the financial industry have likely failed to fully grasp until now.
Export Controls
She telegraphed that further actions could potentially come in the form of more export controls and additions to the entity list restricting access by anyone who supports China’s military.
The Treasury will use its authority to sanction threats related to cybersecurity and China’s «military-civil fusion».
As part of that, the US government will continue to review foreign investments for national security risks and is considering a program to restrict outbound investment with national security implications.
Bankers Beware
Just those statements, taken in and of themselves, are likely to keep regional sanctions teams on edge.
But they also portend additional steps against a range of sovereign-owned entities (SOEs) in China, something that could prove to be far harder for foreign banks to understand and tackle, particularly if they have significant commercial banking operations. Or if they bank high net-worth clients with connections or relationships to the SOEs.
For overseas bankers in jurisdictions that don’t follow the US and EU sanctions regimes related to Ukraine, such as Hong Kong, it might be best to keep their heads low and make sure that stay as far away from all of it as much as possible as getting caught in the middle of all this is likely to be a fraught exercise.
