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Before Ukraine’s invasion, Russia and China had strong economic relations

“If they don’t comply with the US, they get in trouble with the US, but if they don’t comply with China, they can also face penalties in China,” he said.

Of course, collecting fines from companies unwilling to pay and monitoring whether businesses are complying with the rules can be difficult, Mr. Chorzempa added. “Monitoring what is already controlled has proved difficult, and if you expand that list, it will be a real challenge to verify what is coming to Russia,” he said.

The Biden administration’s export controls apply to goods made in any country as long as they use American technology – including chipmakers like Semiconductor Manufacturing Co. led Taiwan and Shanghai-based Semiconductor Manufacturing Industry Corporation.

Both companies continue to depend on the United States for certain components and manufacturing technologies, said Gabriel Wildau, managing director at Teneo, a consulting firm. If they continue to supply Russia, SMIC and other Chinese companies could be cut off from American technology, much like the punishment that paralyzed Huawei.

“If Beijing is seen as a fundraiser for Moscow, then Congress will increase pressure to expand these restrictions,” Wildau wrote in a note to clients. Beijing will also face the risk that other major technology exporters such as Japan, South Korea and the Netherlands “will adopt Washington’s tougher line,” he said.

China’s state-owned banks could also be at risk by continuing to lend to Russia. China and Russia have been settling much of their trade using the renminbi and the ruble. Beijing is also trying to develop the use of its digital currency as an alternative to the dollar, which could help Russia limit the effects of financial sanctions.

But Chinese banks are still heavily dependent on the US dollar. Mr. Wildau said that while China’s major banks appear to be withdrawing their financing to Russia, Beijing may choose to support Russia by using smaller state-owned banks that do not. Many international business activities require the use of dollars.

https://www.nytimes.com/2022/02/26/business/china-russia-ukraine.html Before Ukraine’s invasion, Russia and China had strong economic relations

Fry Electronics Team

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