Fan Yifei, the deputy governor of the People’s Bank of China, has illustrated the threats to the country’s financial stability. Photo: Courtesy of the State Council Information Office

PBOC warns that China’s financial network faces catastrophic risks

Deputy Central Bank Governor Fan Yifei highlights the challenges facing the country amid Sino-American tech war

ByChina Factor Staff

China’s Central Bank Deputy Governor Fan Yifei has warned that the Sino-US technology row carries catastrophic risks.

In a commentary for China Finance, he outlined the growing concerns percolating through the world’s second-largest economy and highlighted the challenges ahead.

“Under extreme circumstances, it would severely undermine the stable operations of our country’s financial network and information system,” Fan said in the magazine run by the People’s Bank of China.

His comments came amid increased stress on tech supply chain security for the country’s financial network amid deteriorating diplomatic relations between Beijing and Washington.

At a time of rising discomfort with US-China technology integration, numerous other companies – both Chinese firms operating in the US and US firms with a presence in China – may be forced to divest

Rhodium Group

New Cold War tension has already seen investment between the United States and China plunge to a nearly decade low.

In the first half of 2020, direct investment by companies and venture capital flows fell by nearly 16.2% to US$10.9 billion, a report co-authored by the Rhodium Group, a consultancy, highlighted.

To put that into context, close to $40 billion was invested in 2016 and 2017.

“At a time of rising discomfort with US-China technology integration, numerous other companies – both Chinese firms operating in the US and US firms with a presence in China – may be forced to divest,” the report stated last month.

While the Covid-19 pandemic has had an impact, the main driver of the slump has been the tech and trade conflict.

Chinese companies have been hit by an array of sanctions. Huawei is on a Washington trade blacklist along with a group of other firms, including ZTE.

Cut Links

TikTok has also been ordered to cut links from owner ByteDance if it wants to be able to operate in the US because of national security issues.

“Right now we’re moving towards decoupling,” Stephen Orlins, of the report’s co-authors the National Committee on US-China Relations, said.

“It’s human rights, it’s economic reform, it’s the South China Sea, it’s the Hong Kong National Security Law, it is Taiwan … [there’s] a long, long list of issues where there are very high tensions,” Orlins, who is is president of the US non-profit organization, added.