The United States House of Representatives recently passed the Pressure Regulatory Organizations to End Chinese Threats to Taiwan Act, or the so-called PROTECT Taiwan Act (the Act) — a piece of legislation carrying extraordinary implications for the architecture of global finance.
The bill seeks the exclusion of China from six major international organizations — the Group of 20, the Bank for International Settlements, the Financial Stability Board, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, and the International Organization of Securities Commissions — should the US president inform Congress about “actions by China that result in threats to Taiwan’s security or social or economic system, and any danger to US interests”.
This legislation should be understood not in isolation but as the latest and most extreme step along a well-worn path. For years, the US has pursued an escalating strategy of containment against China: a sweeping ban on technology transfers, punitive tariffs, pressure on allies to sever supply-chain linkages, and export controls designed to hobble Chinese advances in semiconductors and artificial intelligence. The cumulative trajectory points unmistakably toward a single objective — the preservation of American primacy. The Act merely extends this logic into the institutional plumbing of global finance, threatening China with systemic exclusion.
The real purpose is not the defense of Taiwan, but the maintenance of a unipolar financial order in which the US retains the ability to suppress any rival through institutional leverage.
After years of reckless behavior by the US … the world is quietly but unmistakably de-risking its exposure to the US and deepening its collaboration with China. What the global economy needs now is a system capable of hedging against US overreach — not only in the domain of security, but in the equally vital domains of economics and finance
The damage, however, would extend far beyond China, including the Hong Kong Special Administrative Region, should the Act eventually be passed into law and triggered. Ejecting the world’s second-largest economy from the committees that set global banking and insurance standards would fracture the multilateral financial architecture in ways that harm every participant. Emerging markets that rely on Basel standards for credibility with international investors would find those standards hollowed out by the absence of a major jurisdiction. Cross-border insurance arrangements, derivatives clearing, and securities regulation all depend on cooperative frameworks in which Chinese participation is a necessity dictated by the sheer scale of Chinese financial activity. European, Southeast Asian, Middle Eastern, and African economies with deep trade and investment links to China would face heightened uncertainty, wider risk premiums, and potential disruptions to correspondent banking and trade finance channels. In a deeply interconnected global economy, the shockwaves would be indiscriminate.
Whether the Act will ultimately be passed into law and invoked remains an open question. But the mere passage of such legislation in the House of Representatives signals intent. The precedent, moreover, is already established. The exclusion of Russian institutions from SWIFT — the secure global messaging network used to transmit instructions for cross-border money transfers — demonstrated that the US is willing to weaponize financial infrastructure. The Act formalizes the possibility of doing the same to China through institutional exclusion.
It is therefore imperative that China begin de-risking in advance, and the HKSAR, by virtue of its international trade and financial center status, is uniquely positioned to play a critical role in that effort. The most immediate priority is the expansion of renminbi-denominated cross-border payment flows. Here, the HKSAR can help accelerate the adoption and scale-up of both mBridge and the Cross-Border Interbank Payment System (CIPS) by serving as a key testing, liquidity, and connectivity hub linking global banks, corporates, and regulators. Building redundancy into RMB settlement is highly feasible; by integrating mBridge pilots and CIPS rails, Hong Kong can provide complementary pathways for cross-border RMB settlement. This materially improves resilience for trade with partners willing to invoice and settle in yuan.
However, beyond payments infrastructure Hong Kong must make the RMB genuinely usable at scale through practical financial ecosystem development. To ensure counterparties can hold and use the currency with confidence, the city must increase RMB transaction capacity and deepen hedging instruments. As the principal offshore RMB hub, Hong Kong can support active CNH (offshore RMB) foreign exchange and broaden the menu of RMB-denominated assets — such as bonds and money-market instruments — with transparent pricing and reliable settlement. The more complete this offshore ecosystem becomes, the lower the friction for RMB use in real-economy trade and finance. In parallel, Hong Kong should expand and deepen Stock Connect and other mutual market access arrangements with the Chinese mainland. A broader, more flexible Connect framework would help sustain cross-border portfolio flows and price discovery even if external sanctions constrain certain channels, giving the financial system vital breathing space to continue operating.
Complementing these financial defenses, the HKSAR’s next growth frontier lies in building a world-class commodities trading ecosystem, a strategic move explicitly endorsed by the 15th Five-Year Plan (2026-30). While this will undoubtedly drive local economic expansion, its broader mandate is to insulate China from the looming threat of a US financial war by anchoring physical trade outside the dollar system. By starting with gold, in which the HKSAR possesses a strong foundation, the city can seize global pricing influence in international trade. In the longer term, expanding this ecosystem to include oil and agricultural products will provide China with a secure, non-dollar-dependent trading hub, fundamentally reshaping the global financial architecture.
Critically, Hong Kong must also maintain its credibility as a regulatory bridge to other trading centers. By upholding high-quality licensing standards, market-conduct enforcement, robust anti-money-laundering controls, transparent disclosure regimes, and orderly resolution planning aligned with recognized international norms, Hong Kong can reduce the risks for third parties choosing to continue trading should US “sanctions” be enacted. Deepening bilateral supervisory cooperation through memoranda of understanding, information-sharing protocols, and joint inspections with a broad range of regulators becomes even more important when multilateral forums are rendered less accessible by political exclusion. In parallel, Hong Kong’s common-law legal framework and respected arbitration and mediation institutions can give counterparties the contract certainty needed to sustain cross-border transactions under stress, lowering the legal and operational uncertainty that can shut trades down.
After years of reckless behavior by the US — weaponizing the dollar through sanctions, confiscating sovereign assets, threatening allies over territorial ambitions in Greenland, a unilateral assault on Iran and killing its leaders, disregarding international law to detain the president of Venezuela in pursuit of oil interests and the perpetuation of the petrodollar system — the world is quietly but unmistakably de-risking its exposure to the US and deepening its collaboration with China. What the global economy needs now is a system capable of hedging against US overreach — not only in the domain of security, but in the equally vital domains of economics and finance.
The author is a consultant at the Global Hong Kong Institute.
The views do not necessarily reflect those of China Daily.
Leave a comment