China needs U.S. dollars but is building a hedge against Washington’s sanctions

BEIJING — The U.S. is threatening to cut businesses that help Iran evade sanctions off from the American financial system. It puts China's banks in an uncomfortable position: Beijing can reject the demands, but its biggest lenders still have strong incentives to preserve access to U.S. dollars.

U.S. Treasury Secretary Scott Bessent announced on Monday that any entity facilitating "money laundering or sanctions evasion on behalf of Iran risks being cut off from the U.S. financial system." It was part of the "Economic D-Day" against Iran announced by U.S. President Donald Trump .

When asked specifically about Chinese banks, Bessent said: "If they facilitate transactions and are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted ."

China said Tuesday it would "take all necessary measures" to protect itself.

"China has made clear on many occasions its firm opposition to illicit unilateral sanctions that have no basis in international law or the authorization of the UN Security Council," a Chinese foreign ministry spokesperson said on Tuesday in response to questions.

Before the war, China bought around 90% of Iran's exported oil — about 12% of China's total crude imports — making it Iran's largest trading partner, per analysts at the U.S.-China Economic and Security Review Commission in March.

Dubbed "Operation Economic Outcast ," the expanded U.S. sanctions identified several China-based companies and individuals as having allegedly assisted the Iranian military.

The U.S. said it would give countries a timeline to shut down identified activities, but didn't share dates publicly. When CNBC asked about communication regarding the timeline, China's foreign ministry said it was closely monitoring the situation and reiterated that Beijing would protect its interests.