Hoping to deter the Chinese Communist Party (CCP) from invading the neighboring self-ruled island of Taiwan, the U.S. House Financial Services Committee has approved several pieces of legislation that would impose economic restrictions on CCP officials and influence international bodies to put pressure on China.
A Strategy of Deterrence
Some of the proposed bills—even if passed—wouldn’t take effect unless the president were to declare a Chinese threat to Taiwan. If that declaration were made, the Taiwan Conflict Deterrence Act would authorize the Department of the Treasury to bar U.S. financial institutions from doing business with top CCP officials and their family members.“This would apply to the highest echelons of the Chinese Communist Party, including Xi Jinping himself,” said Rep. French Hill (R-Ark.), the sponsor of the bill. Speaking at the hearing, Hill stressed the importance of adjusting China’s incentives to invade Taiwan.
“Congress has to change Beijing’s cost-benefit analysis beforehand,” he said. “They can avoid these costs by simply stepping back from aggressive militaristic threats towards the Taiwanese.”
Across the aisle, Rep. Brad Sherman (D-Calif.) described Taiwan as a crucial ally and trading partner to the United States.
“An attempt to blockade or invade Taiwan would be very unsettling to the entire world order,” he said at the hearing. “It’s something we need to deter.”
Sherman, concerned that the CCP might also provide lethal aid to the Russian army, is working on legislation that would require goods made in China to be labeled with a sticker reading, “Warning: Purchase of this product may facilitate war crimes in Ukraine.”
Contingent on the U.S. president’s declaration of a threat to Taiwan from China, the bill would task U.S. financial regulators with excluding CCP officials from participating in key international organizations such as the G-20 and the Bank of International Settlements.
Preemptive Measures
A number of other China-related proposals put forth by the committee would take steps against the CCP without the need for a presidential threat declaration. These bills are aimed at leveraging U.S. influence over the International Monetary Fund (IMF).Rep. Young Kim (R-Calif.), a Korean-born congresswoman and sponsor of the Taiwan Non-Discrimination Act, hopes to change that and said that membership for Taiwan is long overdue.
“Taiwan is one of our top 10 trading partners, and it has the fifth-largest reserves of any foreign country,” she said. “Why wouldn’t we want its experiences to inform the work of the IMF?”
It would require Yellen to use her IMF vote to “oppose any increase in the weight of the Chinese renminbi in the basket of currencies used to determine the value of Special Drawing Rights.” These special drawing rights (SDRs) are international reserve assets, held by central banks around the globe.
An SDR is a basket of major currencies—specifically the U.S. dollar, euro, renminbi, Japanese yen, and pound sterling—that allows owners to redeem the underlying monies for liquidity needs. Dollars represent more than half of an SDR’s worth, while China’s renminbi (also called the yuan) makes up just 12 percent.
Rep. Blaine Luetkemeyer (R-Mo.) criticized Yellen for not taking a firmer stance against China sooner and said the IMF’s favoritism of China over Taiwan was unfair.
Congress Too Hawkish?
Some economists think that starting a financial war with China would be unwise.“I don’t think we have the [economic] artillery to actually fight a war with China,” Peter Schiff, chief economist and global strategist of Euro Pacific Asset Management, told The Epoch Times. “China is our biggest supplier and our biggest lender.”
“Our trade deficit is larger with China than it is with any other nation, and so America is more dependent on goods flowing in from China,” he said.
