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UK banks draw up contingency plans in case West-China geopolitical escalation

Major UK banks are preparing for any increased Western sanctions pressure on China by sharing “scenario planning” with the UK and US governments, according to Reuters.

Neil Whiley, director of sanctions at lobby group UK Finance, revealed that the aim of the project is to share experiences of already imposed sanctions, as well as to discuss the implications of sanctions on China.

The UK Finance project investigates the transparency and control of asset ownership, as well as how easy it is to trace Chinese products.

The work was carried out amid growing tensions between the West and China based on the Taiwan issue, increased export controls, allegations of Chinese espionage and Beijing’s crackdown on companies.

Scenarios ranging from major cyber attacks to military intervention in Taiwan could potentially lead to further restrictions on China, a lawyer advising banks suggested.

The biggest financial institutions are … determining whether the exposure they have [to China] is tolerable given a pessimistic direction of travel for geopolitics.

One banker claimed that sanctions against Russia had “removed naivety” among businesses and prompted the industry to think more deeply on China-related risks.

China, the world’s second largest economy, is a key element of Western supply chains. The UK’s two largest banks, HSBC and Standard Chartered, derive most of their profits from Asia, which reflects their dependence on the geopolitical situation.

Underwriters at Lloyd’s of London have raised rates and cut coverage for Taiwan-related risks as concerns grow over possible Chinese military action, according to Reuters.

Four London lawyers have reported a surge in calls from financial clients asking for advice on China. The demand for advice was so great that one lawyer, who wished to remain anonymous, reported that his firm held its first client-only seminar last month on Russia, China and how geopolitics affects sanctions and compliance.

Companies will … want to make sure that for long-term engagements with Chinese entities, they have robust sanctions provisions in their contracts and agreements.

Lawyers believe the banks’ worries are partly driven by the US’ determined approach to the semiconductor and technology industries, as well as foreign policy discussions.

Washington has restricted chip exports to China to deny Beijing access to advanced technologies that could contribute to military advances or human rights abuses. In response, China accused the US of economic oppression.

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