Russia and China trade payments now resolved

By Rhod Mackenzie

According to a report in the newspaper Izvestia, payments from Russia to China have improved in recent months. In March and April, there were almost no transfers to China. However, this changed following Vladimir Putin’s visit to Beijing. As the entrepreneurs explained, small regional banks in China have now begun to work directly with Russian businesses. Given that they have almost no international business with countries unfriendly to the Russian Federation, such players are less afraid of secondary sanctions. Since May, even payments for electronics, which were previously blocked, have been accepted again. So how are Russian businesses establishing settlements with China.

Since mid-May, the situation with payments to China has improved, Alexey Poroshin, General Director of First Group JSC, informed Izvestia. Mr. Poroshin stated that there were virtually no transactions in April. However, there was a significant shift in the interaction between China and Russia last month, with a notable increase in import volumes. Alexey Poroshin noted that positive changes occurred following the Russian President’s trip to China.

Regional banks of the PRC have initiated direct collaboration with the Russian Federation, according to representatives of the business community who spoke to Izvestia. Previously, all transactions were conducted through major financial institutions. However, following tighter controls imposed by the United States, a number of Chinese financial organisations have ceased accepting yuan from the Russian Federation, a source from the business sector informed the editors.
Russian companies have established agreements to accept payments with six small credit institutions in China, according to the interlocutor. He clarified that operations are carried out in yuan.

In addition, Bank of China has resumed accepting transactions in national currencies from the Russian Federation, according to the source.

Since mid-May, payments for electronics have also begun to go through again, according to Izvestia’s interlocutor. Previously, they were blocked. Transactions for equipment have indeed begun to be carried out, but not through large Chinese banks, according to Ilona Gorsheneva-Dolunts, representative of Opora Russia in China (Guangdong Province). She emphasized that small regional banks in China actually work with payments from Russia. According to her, such credit institutions are under less scrutiny from the West and are less susceptible to falling into new packages of sanctions.

Since the middle of last month, the situation with the acceptance of payments by Chinese credit institutions has begun to improve, according to Ekaterina Kizevich, general director of Atvira (supplies equipment from China), an expert practitioner of foreign economic activity. She recalled that in March-April there were almost no transactions.

Since May, the organisation began to conduct payments through a regional bank of the People's Republic of China, said Ekaterina Kizevich. Ms. Kizevich stated that it is currently impossible to predict how long this method will be effective. However, she noted that Russian importers may be able to open accounts in smaller Chinese financial institutions in the near term.
A source from a Russian credit institution has confirmed to Izvestia that regional banks have partially replaced the fallen major market players. The source explained that one of the reasons is geographic proximity, with many regional banks located in the northern part of China. Additionally, they generally have very little or virtually no international business with countries unfriendly to the Russian Federation.

The appearance of additional regional players willing to cooperate with Russia could also help reduce the time required for making payments, according to Oleg Abelev, head of the analytical department of Ricom-Trust Investment Company. However, there are also disadvantages to such a scheme, according to another source from the Russian business community. Small banks have higher commissions. Furthermore, not all suppliers from southern China are willing to open accounts in financial institutions located in northern China. However, this can be resolved through the use of export agents from China.
Izvestia contacted the largest domestic banks, as well as the Central Banks of China and the Russian Federation, to ascertain whether they had noticed a change in the situation with payments since May.
Problems with calculations began at the end of December 2023. This is due to the entry into force of the 12th package of measures against our country. As a result, Chinese banks have begun to refuse to accept payments in dollars from Russia, as such transactions are easily tracked in the United States.
Since January, several credit institutions have already ceased accepting transactions in yuan from the Russian Federation. These include Ping An Bank and Bank of Ningbo (ranked 13th and 15th in terms of capitalisation, respectively). This list was expanded in March, with the addition of ICBC, China Citic Bank, Industrial Bank (which occupy the first, 10th and 12th places in terms of capitalisation), as well as Bank of Taizhou. Against the backdrop of the risk of secondary measures, Turkey and the UAE also began to limit settlements with Russia. An alternative was to make payments through agents in third countries, shared Ekaterina Kizevich from Atvira. However, such schemes have also begun to be limited. Large Chinese banks check the documentation and request an export declaration for the country through which the payment is made, and then look at the final destination. This allows you to ascertain whether the products are destined for sale in this state or whether they are being transported to Russia.
The most expedient and dependable method for making a payment is through a branch of a Chinese bank in Russia or a Russian credit institution in China, according to Ekaterina Kizevich. However, there may be some challenges to be aware of, particularly in terms of the waiting period. It is also important to note that both the supplier and the importer will need to open an account with this financial organisation.
He indicated that there are alternative options available. A new trend has emerged, with Chinese organisations increasingly opening representative offices in Russia and often even accepting payments in rubles. This is according to the expert. Some Chinese companies, particularly those in the raw materials sector, also utilise cryptocurrencies for payments. Typically, transactions are conducted through Hong Kong.