Photo: IC

The US and a number of Western countries have been caught interfering with Hong Kong affairs. The US publicly support "Hong Kong independence" advocates while at the same time impose illegal sanctions on some Hong Kong Special Administrative Region (HKSAR) officials who defend the the Basic Law of the HKSAR. Through blocking and suspending credit cards and other financial mechanisms used by these officials, these sanctions impede on their human rights and lawful interests and deserve strong condemnation. 

The system known as SWIFT, the US dollar denominated international payment network controlling 80 percent of the world's cross-border payment and information exchange among financial institutions, has played an important role in continued US efforts to interfere with the region. Its intended purpose is to serve as an international trade settlement tool, but in reality, it has become a weapon for the US hegemony to crackdown on opponents.

If the US seeks to crackdown on a country or institution, it can directly cut their connection with the CHIPS, another US dollar cross-border settlement system, making it impossible for a targeted party to conduct any US dollar-related transactions. When the US imposes sanctions on individuals or institutions, almost all international banks must audit if they have business transaction with those subject to sanction. It's concerning that aside from restrictions on financial consumption on HKSAR officials, the US government and a handful of politicians will take extreme measures such as excluding those on the Chinese mainland from using SWIFT, in a bid to weaken and degrade China's trade system and contain China's economic development.

Over recent years, the US government has promoted "America First" policies, including imposing unprecedented sanctions on Chinese companies and restricting companies from participating in international trade. The US, by using SWIFT as a weapon against Chinese companies, is arbitrarily wielding a "big stick" of sanction in a bid to contain Chinese companies' international businesses. However, efforts to completely exclude Chinese mainland from SWIFT transactions have so far proved almost impossible.

Should the US continue down this path, American companies will suffer direct losses. The annual trade volume between China and the US is around $500 billion, this trade is essentially built on the SWIFT system, if the mainland is totally excluded from the system, US companies will suffer disproportionately. 

Additionally, as the largest exporter and second largest importer in the world, China has more than ten thousand companies trading across borders. If the US prevents Chinese mainland businesses from using SWIFT, global trade faces paralysis.

China's banks and financial institutions' influence on global financial market is surging. Chinese overseas listed companies and foreign capital flows all rely on SWIFT's technology. No country can ignore the huge profits generated by these companies.

The US government's intention to restrict some Chinese individuals' use of these financial channels will have only a limited impact. The largest impact will be on individuals who can no longer use US dollars to execute cross-border payments. 

However, China also needs to be prepared for extreme action taken by the US. To avoid the impact from potential aggressive US trade measures, Chinese companies have been seeking more open and stable international payment tools. China needs to promote diversified trade cooperation and deepen international economic cooperation. China should make payment settlement system reform a priority, offering suppliers, businesses and individuals' greater choice, adhering to the principles of transparency and rule of law when building an international settlement system. 

China needs to emphasize and strengthen cooperation with the International Chamber of Commerce (ICC), the most influential international trade settlement system body. The establishment and modifications of SWIFT's rules must be carried out under an ICC framework

China's own digital currency could also gradually serve as an international trade settlement tool. China can promote the digital currency through the Belt and Road Initiative to improve trade and reduce costs. As international cooperation in fight against COVID-19 becomes more important with countries battling against economic stagnation, both governments and businesses require any international trade and settlement system to be both independent and open, acting as a highway for accelerated economic growth and cooperation. 

The author is a senior fellow of the Chongyang Institute for Financial Studies at Renmin University of China. bizopinion@globaltimes.com.cn