China needs the SWIFT system quite a bit, because its economy is heavily driven by international trade, especially exporting manufactured goods, in a diversified market with large numbers of small to medium sized exporters (as well as large ones) who have large numbers of international customers and need commercial banking intermediaries to conduct those transactions. Exclusion from SWIFT would have a dramatically greater impact on China's economy than this sanction did on Russia's economy as a result of the Ukraine War.
International trade accounted for 37.47% of China's GDP in 2021, according to the World Bank.
If you are, say, Saudi Arabia, with an economy that relying heavily on exports of a single commodity from a single seller to a handful of large international wholesale distributors (like Exxon, Shell, BP, etc.), you can have lawyers negotiate workable alternatives to exchanging funds through commercial bank mediated SWIFT transactions in individualized contract terms and the additional hassle and transaction costs of, for example, setting up a parallel correspondent banking system at a Swiss bank, is manageable.
But if you are a SHEIN selling cut-price fast fashion over the Internet to the world in myriad $100-$300 transactions, or a medium sized Alibaba vendor selling one kind of $15-$1,000 industrial part at a time to factories all over the world in small lots, this doesn't work. International money transfers require a system that both buyer and sellers can easily access. The collective volume of money transfers, with Chinese parties to the transaction, that are handled via SWIFT is substantial to the point where these transactions drive a material share of China's entire GDP.
The trouble with competing systems like China's Cross-Border Interbank Payment System, or Russia's System for Transfer of Financial Messages, is that they don't have a rich network of participants on both sides of the countries that engage in international trade and finance with each other outside China or Russia respectively. An international money transfer system that is heavily lopsided in only a single country doesn't serve its purpose very well.
In China's home-grown system:
At last count, there were 76 direct participants, mainly overseas
branches of Chinese banks, located on every major continent except
Latin America.
The Western alternatives have vastly more non-Chinese participants. And, China's own system handles only about 2% of China's international money transfers, of which, about 80% of those transactions also have to use the SWIFT system in addition to China's own clearing system.
In the case of Russia, which was mostly cut off from the SWIFT system as an economic sanction in reaction to its invasion of Ukraine, that wasn't a horribly big deal (Russia was not entirely banned from SWIFT even though a ban was imposed on many, but not all, banks. For example, it seems Gazprombank can currently still process SWIFT transactions.) This is because in the world of international trade, Russia's international commercial activity looks a lot like Saudi Arabia's even though it has a much more diverse domestic economy than Saudi Arabia. Russia is a welterweight in the non-fossil fuel international trade department given its population, level of economic development, the size of its GDP, and the diversity of its domestic economy.
Russia's economy isn't terribly commercial and manufacturing export driven, and Russia is less reliant upon foreign investment than ever.
Prior to the Ukraine War, exports were 31% of Russia's GDP. But about half of all Russian exports were of fossil fuel products whose exports were highly concentrated in a handful of exporters to a small number of importers. A large share of the rest of its leading exports: wheat, fish, gold, iron, and nickel are raw or minimally processed raw materials that were likewise sold to a small number of high volume industrial concerns in China and Western Europe. Those importers process Russian raw materials and then sell the finished goods to local wholesalers, who in turn sell them to retailers, who in turn sell the processed goods to the general public. Russia has very few direct to consumer, or even direct to retailer, exports as a part of its mix of exports goods. As previously noted, however, SWIFT isn't too important in situations where you have a small number of exporters and importers with high economic value transactions in every contract.
But in the case of China, this isn't so. China's international commercial activity is not a Saudi Arabian style natural resource driven trade concentrated in a few key exporting companies to a modest number of importing companies abroad. It is massively decentralized and commercial, and it is selling its goods in immense volumes to countries outside its own sphere of influence and outside of Russia's sphere of influence to countries in the West. And, in the West and in other countries outside China and Russia's respective spheres of influence, SWIFT is baked into international commercial dominance for compatibility reasons similar to the reason that everybody in the U.S. uses Microsoft Word, and that the Internet runs on a common HTML language.
If China were kicked off the SWIFT system, workarounds could be devised. But it would be comparable in economic impact to flooding the Pacific and Indian Oceans with 100,000 pirate ships intent on raiding its container ships. It would dramatically interfere with China's export driven sector that is one of the main drivers of its domestic economy and unprecedented sustained economic growth.
