Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019.
Aly Song | Reuters
BEIJING — As the U.S. ramped up pressure this week on China with secondary Iran sanctions, the world’s two largest economies have still managed to stay focused on ways to cooperate.
It’s a sign of the balancing act on both sides, even as White House rhetoric has remained tough.
U.S. President Donald Trump signaled to reporters Thursday local time he could be sanctioning Chinese banks. “I don’t have to announce everything,” he said, according to a Fox News stream of the event.
Those comments followed a meeting between U.S. and Chinese officials in Beijing on Wednesday, according to official announcements.
U.S. Ambassador to China David Perdue said in a social media post that he met with China’s Foreign Minister Wang Yi and three other Chinese officials to discuss President Xi Jinping’s upcoming state visit to Washington.
China’s readout also noted Perdue’s comment on “preparing well for the next stage of important high-level interactions,” according to a CNBC translation of Chinese.
Trump on Thursday even mentioned Xi was coming in a few weeks.
U.S. Treasury Secretary Scott Bessent on Monday had warned that if Chinese banks “are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted.” It was part of Trump’s “economic D-Day” announcements against Iran.
Other than Bessent’s comments, there few details on specific actions, said Jodie Wen, postdoctoral fellow at the Center for International Security and Strategy (CISS), Tsinghua University. It’s more of a warning, she said.
Wen added that the Trump-Xi summit in May marked a shift toward controlled competition, rather than the Biden administration’s “strategic adversary” view on China.
Moderate response
China’s official response to U.S. secondary Iran sanctions has also been muted so far.
Beijing responded by saying it would “take all necessary measures” to protect itself, but did not elaborate on possible actions. When asked about communication with the U.S. on Iran, a foreign ministry spokesperson said there was no information to share.
However, the spokesperson said the two countries were in talks about a Trump-Xi meeting.
Beijing will “note the lack of groundwork that was laid ahead of Bessent’s ‘D-Day’ announcement. And they will conclude that this is largely performative,” Ryan Hass, director of the China center and Chair in Taiwan studies at Brookings, said in a social media post. Hass advised the Obama administration as director for China, Taiwan and Mongolia for the National Security Council.
“Sec. Bessent already basically gave away the game when he responded to a question by asking, ‘Why would I want to blow up the global financial system?’ Beijing will interpret this as signaling that the US is not going to go after major Chinese financial institutions,” Hass said.
He expects the U.S.-China trade truce to remain intact because the “alternative is worse for both sides.”
Beijing can also comply with U.S. sanctions and its own interests at the same time.
The Asian country has built a legal mechanism that essentially tells Chinese companies their foreign bankers must comply with U.S. rules, but inside China, Beijing’s law takes precedence, said Han Shen Lin, China managing director for The Asia Group and a former executive at Wells Fargo Bank in China.
— CNBC’s Anniek Bao contributed to this report.