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- The US is drafting sanctions on Chinese lenders, The Wall Street Journal reported.
- These could cut China off from accessing the US dollar and Western markets.
- Lawmakers are worried that China's commercial exports to Russia are helping its military industry.
The US is taking sharper aim at Chinese financial institutions, in an effort to stamp out a key source of support for Russia's military production.
Lawmakers in Washington are actively drafting a round of sanctions against such banks, the aim being to completely cut these lenders off from the global financial system, The Wall Street Journal reports.
Although this constitutes a more forceful step than seen before, the ballooning trade between Beijing and Moscow is feared to be helping Russia rebuild its war machine. While no weapons are exchanged, China has become the lead supplier of essential industrial components, from circuitry to aircraft parts.
For instance, exports of dual-use goods are estimated to have jumped from a few thousand to almost 30,000 a month in March, according to the Center for Strategic and International Studies.
Such volumes amplify concern that Russia could hold out in a war of attrition against Ukraine, especially as Kyiv falls deeper into an ammunition shortage.
Previously, the threat of US secondary sanctions has already sparked a pullback in Chinese-Russian financial dealings, including restricted yuan payment transactions. But while this has added difficulty in facilitating trade, it hasn't stopped the two economies from drawing closer together.
New sanctions could go as far as cutting China from accessing the US dollar, the linchpin currency used in global trade. This would essentially shun Beijing from Western markets, a threat US officials are hoping will induce change on China's part.
And for an economy roiled by debt and struggling to rebound, that would only add to issues. But it also means risks for Washington, as it could speed up de-dollarization efforts.
"China can't have it both ways," Secretary of State Anthony Blinken said last week. "It can't purport to want to have positive friendly relations with countries in Europe, and at the same time be fueling the biggest threat to European security since the end of the Cold War."
He is headed for China on Tuesday.
Beijing responded to the news by calling the US' approach as "hypocritical," Reuters reported.
"China's right to conduct normal economic and trade exchanges with other countries, including Russia, is inviolable," Wang Webin, a spokesperson from China's foreign ministry responded to the sanctions threat in a Tuesday news briefing.