China's support for Russia causes “panic selling”, PRC banks, firms “bypass” Russia sanctions, & U.S., China meet in Rome amid reports Russia asked China for weapons -- China Boss news 3.14.22
Newsletter
The Big Story in China Business
China's support for Russia triggers “panic selling” and “biggest plunge” on Hang Seng since financial crisis
"Panic selling” triggered by China’s continued support for Russia after it invaded Ukraine is "grip[ping] Chinese stocks" on Hong Kong’s Hang Seng Index, causing the "biggest plunge since 2008," Bloomberg earlier today reported.
Bloomberg:
Chinese stocks listed in Hong Kong had their worst day since the global financial crisis, as concerns over Beijing’s close relationship with Russia and renewed regulatory risks sparked panic selling.
The Hang Seng China Enterprises Index closed down 7.2% on Monday, the biggest drop since November 2008. The Hang Sang Tech Index tumbled 11% in its worst decline since the gauge was launched in July 2020, wiping out $2.1 trillion in value since a year-earlier peak.
While simple transactions with sanctioned Russian persons and firms are still permitted - the threshold, defined in Executive Order 14024 as “materially assist, sponsor, or provide financial, material, or technological support for, or goods or services,” - is a “legal gray area” and the “expanding list of Chinese companies subject to U.S. sanctions or procurement controls” as a result of heightened geopolitical tensions is unnerving investors, Bloomberg’s Shuli Ren said.
Ren, Bloomberg:
The U.S. government has already put Beijing on notice. U.S. Secretary of Commerce Gina Raimondo warned that Chinese companies wanting to buy American equipment and software would be cut off if they supplied chips and other advanced technology to Russia. Nearly one-third of Russia’s chip imports come from China.
More broadly, U.S. Treasury department’s Gary Hufbauer told Politico China Watcher that “Russia is counting on China to supply a wide range of consumer and industrial goods, and to buy wheat, corn, sunflower oil, metals, and above all oil and gas, and that he thinks “absence of Chinese support could cost Russia another 2 percent.”
However, it remains to be seen whether the threat of secondary sanctions on firms doing business with Russia will effectively deter all or, even, many Chinese and other suppliers.
“You can imagine enterprising Chinese and Indian companies importing things that Russia needs and then reselling them to a Russian company at a markup,” said VICTOR SHIH, the Ho Miu Lam chair in China and Pacific Relations at UC San Diego’s School of Global Policy and Strategy. “China has an enormous financial system, and it can hide Russia-related transactions within China,” Shih added. “Eventually maybe the U.S. or other countries will find out through various means, but it could take months or over a year … just because there's so many financial transactions in China every day.”
For Bloomberg’s report, Panic Selling Grips Chinese Stocks in Biggest Plunge Since 2008, click here. For the rest of Shuli Ren’s Opinion in Bloomberg, China Risks Getting Snarled in Web of Russia Sanctions, click here. For Phelim Kine’s report in Politico China Watcher, China in congressional crosshairs for support to Russia, click here.
Law and International Xi
Chinese banks, firms “bypass” Russia sanctions, Reuters
Keep reading with a 7-day free trial
Subscribe to China Boss News to keep reading this post and get 7 days of free access to the full post archives.