Will the United States squeeze China out of the global settlement system to isolate China's finances?

  The next battleground for u.s.-china rivalry could be financed. Concerns have been raised about whether u. s.will kick China out of the global interbank financial telecommunications association (SWIFT) system, which it is estimated would exclude china from u. s.dollar system and sever ties between Chinese financial institutions and the global financial system. Chinese officials and economists worry about China becoming a financial island.

 Washington has taken a number of steps in the financial sector, including proposing to drive Chinese companies that do not meet U.S. accounting standards out of the U.S. stock market and strengthen scrutiny of investments from China.

 United States dollar settlement system

   Almost all the world's financial institutions have access to the SWIFT system, through which they can trade with banks in other countries. At present, most international cross-border transactions are settled in dollars, which is one of the basic systems to support the dollar's anchoring role in international trade and investment.

 While the Belgian-based SWIFT is an international cooperation organization governed by EU law, the United States has an important influence on SWIFT because of its dominant position in the settlement of dollars. The association restricted financial transactions with North Korea and Iran after the U.S. announced financial sanctions.

 all state-owned commercial banks in China have joined the SWIFT system, which means that once subject to u.s. financial sanctions, SWIFT may exclude these institutions, causing china to be unable to settle dollar transactions anywhere in the world.

 If the United States excludes China SWIFT, China may lose $300 billion in trade, more than $90 billion in foreign direct investment and $80 billion in foreign direct investment each year.

 The risk of US sanctions is not remote. The Trump administration has previously announced it will punish individuals involved in undermining Hong Kong's autonomy and Chinese financial institutions that continue to do business with them.

 For Hong Kong, the most serious consequence is the loss of its status as an international financial center, as Hong Kong's financial institutions will not be able to obtain dollars. Affected by the ban, Chinese banks in Hong Kong have reportedly become wary of handling the operations of sanctioned officials.

 The focus is on whether the sanctions will escalate.

 RMB internationalization

    Although economists have repeatedly argued that the risk of cutting China off from SWIFT in the United States is low, Chinese officials and research institutions continue to discuss potential consequences and what China can do to reduce risk.

 China can adopt the format of reference SWIFT to promote the use of an independent message system between the mainland and Hong Kong and Macao and promulgate China's "blocking Law ", which does not recognize the applicability of American law to enterprises in other countries.

 These misgivings have prompted Beijing to renew its call for greater global influence on the yuan and less reliance on the dollar. Some economists have even proposed that China settle in renminbi after the introduction of the new crown vaccine and consider using the digital renminbi to bypass the dollar.

 The People's Bank of China last month urged financial institutions to expand cross-border use of the renminbi. Yi Gang, governor of the central bank, said the current momentum of RMB internationalization was good, with RMB cross-border receipts and payments equivalent to $12.7 trillion in the first half of the year, an increase of 36.7 percent over the same period last year.

 Recently, Beijing and Moscow have also formed partnerships to reduce their dependence on the dollar. For the first time in the first quarter of 2020, the use of dollars in bilateral trade between China and Russia fell below 50 percent, with RMB and rouble trading accounting for 24 percent, according to Russian government data.

 And most experts say u.s. is unlikely to drive china out of the dollar altogether, as it does with North Korea and Iran, a move that could pose a risk to u.s. and the global economy, but the possibility of precise sanctions against individual Chinese financial institutions is rising.

 This topic is closely related to all our Chinese manufacturers. This includes a large number of mold companies and plastic injection products companies. I don't know how we should accept payment from customers if the United States kicks us out of the settlement system.