Aerial photo taken on Oct 15, 2019 shows a view of the Lujiazui area in Shanghai. (PHOTO / XINHUA)

BEIJING - The Chinese mainland should prepare for potential US sanctions by increasing use of its own financial messaging network for cross-border transactions in the mainland and the Hong Kong and Macao special administrative regions, according to a report from the investment banking unit of Bank of China.

The report looked at potential measures the United States could take against mainland banks, including cutting off their access to the SWIFT financial messaging service, a primary network used by banks globally to make financial transactions

Greater use of the Cross-Border Interbank Payment System (CIPS) instead of the Belgium-based SWIFT system would reduce exposure of the mainland’s global payments data to the United States, BOC International (BOCI) said in the report, which was co-authored by a former foreign exchange regulator.

ALSO READ: Washington is biggest threat to the dollar

The bank’s chief economist Guan Tao was previously a director of the international payments department of State Administration of Foreign Exchange (SAFE).

The report looked at potential measures the United States could take against mainland banks, including cutting off their access to the SWIFT financial messaging service, a primary network used by banks globally to make financial transactions.

“A good punch to the enemy will save yourself from hundreds of punches from your enemies,” the report reads, amid deteriorating relating between the world’s two largest economies. “We need to get prepared in advance, mentally and practically.”

ALSO READ: Why US threat to HK dollar peg is unlikely to become reality?

The mainland launched the CIPS clearing and settlement services system in 2015 to help internationalize use of the yuan. Supervised by the central bank, CIPS said it processed 135.7 billion yuan (US$19.4 billion) a day in 2019, with participation from 96 countries and regions.

According to the report, if the United States were to take the extreme action of cutting off some mainland banks’ access to dollar settlements, the mainland should also consider stopping using the US dollar as the anchor currency for its foreign exchange controls.

It also recommended that the mainland develop legislation similar to the European Union’s Blocking Statute, which allowed the EU to sustain trade and economic relations with Iran, a country targeted by US sanctions.

READ MORE: HK's future as a financial hub remains secure