China’s growing military aggression towards Taiwan has the world on edge. Even if it not for another five or ten years, an invasion seems impending. And when it does happen, the US will intervene and defend Taiwan, president Joe Biden has made clear.
The state’s stance is lucid. But what about America’s banking giants?
When pressed in a testimony before the House of Representatives Financial Services Committee yesterday (Sept. 21), the response from the CEOs of top US banks was pretty unanimous. The leaders of JPMorgan Chase, Bank of America, and Citigroup said they’d be ready to pull out of China if it invades Taiwan.
“We’ll follow the government’s guidance, which has been for decades to work with China,” said Brian Moynihan, Bank of America’s chief executive. “If they change their position, we will immediately change it, just as we did in Russia.”
When the Kremlin declared war on Ukraine in February, US banks were quick to wind down operations. They began handing employees in Russia salary advances and moving them out of the country.
Citigroup, which had already been looking to sell off its consumer banking business, dialed back operations and put up its commercial business for sale after Russia invaded Ukraine. But because of western sanctions, it has struggled to find takers. In August, it kickstarted the process of shuttering its 15 branches across the country.
Citigroup employed 3,000 people in Russia, and among all American banks, it had the biggest exposure to Russian business as of year-end 2021: $9.8 billion, according to filings. As of August, it was down to $8.4 billion.
But Citigroup was an anomaly. Most other US banks reported low exposure and a Russian staff headcount in double digits.
Just as the war broke out, multiple economies, including the US, froze Russia’s foreign currency reserve assets. But will the US “really dare to freeze or even confiscate China’s official reserve assets?” Wang Yongli, a former Bank of China vice president, wondered.
Making any such moves to cut China off will be difficult. China is different from—and more economically crucial than—Russia in many ways:
- China has been the world’s factory for over a decade courtesy low labor costs, availability of raw materials and components, a strong business ecosystem, a lack of regulatory compliance, low taxes and duties, and competitive (read: manipulative) currency practices.
- Since 2009, China has been the world’s largest exporter, selling everything from electronic goods to textiles to medical equipment. It dominates global exports of semiconductor devices, and is thus a major player for an industry in flux.
- Over the last decade, China has been the second-largest importer in the world, behind the US. China is the third-biggest purchaser of US exports after Canada and Mexico
- China has the largest foreign exchange reserves in the world. Beijing has called the west’s freezing of foreign exchange reserves a “violation of sovereignty.”
But the assurances given by bank CEOs may all be lip-service, skeptics say.
After all, US banks have stayed put in China even when there have been other reasons to pull out. To name a couple: the Uyghur genocide, ongoing for at least eight years, and China’s drug cartels, which exacerbate the US fentanyl drug crisis.