When the United States and its Group of Seven partners imposed sanctions on Russia’s central bank and barred Western financial institutions from doing business with Russian counterparties, commentators warned of far-reaching changes in the global monetary and financial order.
Other countries would see those sanctions as yet another step in the West’s “weaponization” of finance. Fearing that they, too, might one day be on the receiving end of sanctions, governments and central banks would reduce their dependence on the dollar, U.S. banks and the U.S.-dominated Society for Worldwide Interbank Financial Telecommunication (SWIFT).
China would be the principal beneficiary, these predictions continued. So far, China has sought to remain above the fray in the dispute between Russia and the West. It has a large banking system. It has created a Cross-Border Interbank Payment System to facilitate yuan settlement and provide an alternative to Fedwire and the Clearing House Interbank Payments System through which dollar payments are made.
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