In a recent report, the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party (Select Committee) has studied the recommended a series of actions.
Among them, is for the “Federal Reserve to stress-test US banks for their ability to withstand a potential sudden loss of market access to the PRC and to produce classified reports detailing the results of those assessments and considering the impact on US financial markets of potential US and allied sanctions against PRC financial firms in the event of a conflict.”
From the report: “While in New York, the Select Committee hosted a tabletop exercise that simulated how the United States could respond economically and financially to the People’s Republic of China (PRC) mobilizing for military action against Taiwan. The members were joined by senior executives of large American banks, former senior military officers, and current and former executives from the pharmaceutical, mining, and financing industries.
“During the exercise, the participants sought to deter PRC action through sanctions and financial punishment but soon discovered that, given our significant dependence on and financial entanglement with the PRC, actions during the heat of a crisis could carry tremendous costs to the United States. One key lesson for participants was that the United States must act now to build an economic contingency plan and reduce its dependence on the PRC in critical sectors, address the PRC’s penetration of US capital markets, and build greater collective resilience with allies and partners.”
In addition: “The Select Committee is also investigating the largest index provider, MSCI, and largest asset manager, BlackRock, for facilitating capital flows to PLA [People’s Liberation Army] contractors, human rights abusers, and companies tied to the PRC surveillance state.”