US says it could act against China firms, banks over Russian war support

By David Brunnstrom

WASHINGTON, Virginia (Reuters) -The United States and other nations could take steps against Chinese firms and financial institutions over Beijing's backing for the Russian war against Ukraine, a top U.S. official said on Friday.

The Biden administration has stepped up warnings about China's backing for Moscow and issued an executive order in December that threatened punitive measures against financial institutions helping Russia skirt Western sanctions.

"I think where we are primarily focused are on Chinese companies that have been involved in a systematic way in supporting Russia," U.S. Deputy Secretary of State Kurt Campbell told reporters near the Virginia town of Washington when asked if the Chinese leadership and banks could be targeted.

"We've also looked closely at financial institutions."

The State Department's second-ranked official spoke at the start of a meeting with the vice foreign ministers of Japan and South Korea, Masataka Okano and Kim Hyong Kyun. The three allies have stepped up cooperation in the face of shared concerns about China, North Korea and Russian's war in Ukraine.

Earlier this week Campbell said there was an urgent need for European and NATO countries to send a collective message of concern to China.

"There will be steps that are taken, not just by the United States, but other countries, signaling our profound displeasure about what China is seeking to do in its relationship with Russia on the battlefield in Ukraine," he said on Friday.

Campbell met China's Vice Foreign Minister Ma Zhaoxu on Thursday and raised U.S. concerns about Beijing's support to Russia's defense industrial base undermining European security, the State Department said.

Campbell said his talks with his South Korea and Japanese counterparts would prepare the way for a trilateral leaders' summit later this year. He said the date wasn't yet set, but the meeting was of the "highest priority."

In a joint statement from Friday's meeting, the allies reaffirmed their commitment to use their "collective capacity to strengthen security and maintain peace and stability across the Indo-Pacific."

They pledged to continue working closely to boost economic security, including through Minerals Security Partnership projects, which are aimed at lessening reliance on China and Russia for critical resources needed in high-tech applications.

The allies also committed to work "ever more closely to support Ukraine’s energy infrastructure, recovery, and efforts to hold Russia accountable for its actions," the statement said.

Campbell welcomed "renewed diplomacy" between China, Japan and South Korea, after leaders from the three countries met on Monday for the first time in four years. The two U.S. allies had offered a "very deep and sincere debrief" on their three-way meeting with China, he said.

He also commended Philippines President Ferdinand Marcos Jr for a speech he gave at the Shangri-La Dialogue defense summit in Singapore, where the Asian leader alluded to "illegal, coercive and aggressive" actions by China in the disputed South China Sea.

Campbell praised the speech as strong and purposeful, but would not directly answer a reporter's question on whether any incident involving China's Coast Guard that resulted in a Philippines service member being killed would trigger Washington's mutual defense treaty with Manila, calling it "hypothetical."

Encounters between the Philippines and China in Asia's most contested waters have grown more tense and frequent in the past year as Beijing presses its claims to shoals in waters that Manila says are well within its exclusive economic zone.

"We fundamentally believe that the United States and the Philippines are moving towards a closer set of relations in which we will be able to deepen our security partnership," Campbell said.

(Reporting by David Brunnstrom, writing by David Ljunggren and Michael Martina; Editing by Doina Chiacu, Chizu Nomiyama and Cynthia Osterman)