Chinese banks have reportedly reduced their assets in Russia, as sanctions related to President Vladimir Putin's invasion of Ukraine continue to complicate trade between the two nations.
According to Russian outlet Frank Media, the Bank of China cut its Russian assets by 37% in the second quarter of 2024, now totaling 355.9 billion rubles ($3.9 billion). The Industrial and Commercial Bank of China reduced its assets by 27%, bringing them to 462.4 billion rubles ($5.1 billion), citing "worsening payment problems" on their balance sheets. Newsweek has reached out to the banks for comment.
On the other hand, smaller Chinese banks, such as China Construction Bank and China Agricultural Bank, increased their assets in Russia by 27% and 9%, respectively. Nevertheless, Frank Media noted that Chinese banks overall are scaling back their business growth in Russia due to "ongoing settlement difficulties" between the two countries.
Pavel Bazhanov, a Russian lawyer assisting businesses with legal matters in China, explained to Newsweek that Chinese banks are tightening compliance and increasingly refusing to process payments linked to Russia. "Russian banks often pre-check with Chinese banks to see if a payment can be made," Bazhanov noted, adding that payments are still possible in Russia-China trade if they don't involve sanctioned goods or individuals.
Although Putin has emphasized booming trade with Beijing as a way to offset the effects of Western sanctions, Chinese banks are growing more cautious. They are taking measures to avoid U.S. secondary sanctions, leading to delays and rejections of Russian payments.
Settlement issues began in late 2023 after U.S. President Joe Biden issued an executive order threatening to cut Chinese institutions' access to the U.S. financial system if they were involved in trade related to Russia's military industry.
Since then, Chinese banks have increasingly refused payments for sanctioned Russian organizations. In May 2024, the Russian branch of the Bank of China halted processing yuan payments with U.S.-sanctioned Russian banks, and many other Chinese lenders, including the Industrial and Commercial Bank of China and China CITIC Bank, followed suit.
By June, sanctions against the Moscow Exchange had further disrupted foreign trade settlements in dollars and euros. In August, Russian media reported that 98% of Chinese banks were rejecting yuan-denominated transactions from Russia, forcing merchants to rely on intermediaries, leading to higher transaction costs due to commissions.
Comments
Post a Comment