China’s banks are throttling payments for such transactions out of concern over US sanctions
China firms use an alternate mode of payments to Russia, out of concerns over US sanctions. Guangdong based appliance company is facing hardships to export its electrical goods to Russia, not because of issues with the products but because China’s banks are throttling payments for such transactions out of concern over US sanctions. This is not only causing problems in trading and banking but also causing major problems for small exporters.
The US has imposed a number of sanctions on Russia and Russian entities since the country invaded Ukraine in 2022. They have announced 500 new sanctions against Russia. The President of the United States said that they would target Russia’s war machine. Export restrictions will be imposed on nearly 100 firms or individuals. Now the threat of extending these to the banks in China, is freezing the finances that enhance even the non-military trade from there to Russia.
Due to the uncooperative nature of the big players, Chinese companies have turned to smaller banks on the border and the underground financing channels such as money brokers or even banned cryptocurrency. In 2021 the Public Bank of China announced that such currencies do not have legal tender status and cannot be circulated as currency in the market. While others have withdrawn entirely from the Russian market. The foreign ministry of China is in the dark of the practices described by the businesses to arrange payments or troubles in settling payments through major Chinese banks.
A month or so ago, Chinese banks sharpened their scrutiny of all transactions related to Russia to avoid being in the bad books of the US government. They even jumped to the extent of halting businesses with the country. The government of China is not the only one to reconsider their relations with Russia. Restrictions have tightened in countries such as the United Arab Emirates, Turkey, and even Austria, all resulting from rising US sanctions.
The US Secretary of the States expressed his major concerns to the Chinese Diplomats about Beijing being the substructure of Russia’s brutal war of aggression against c. The United States officials have alarmed the country about actions being taken against the financial institution facilitating trade in goods and military applications. They have also mentioned and discussed sanctions on some of the banks in China.
The foreign ministry of China states that normal trade between China and Russia is not subject to disruption or tampering by a third party. The ministry also states that China does not indulge in illegal, unilateral sanctions.
A decline in trade with Russia has been reported by the biggest money lenders of the country, resulting in a reversing surge in assets after Russia’s invasion. China Construction Bank posted a drop of 14% in its Russian subsidiary’s assets last year and Agricultural Bank of China reported a decline of 7%. On the other hand, Industrial and Commercial Bank of China, which is the big bank of the country, reported a 43% hike of its Russian unit.
The major money lenders refuse to respond or comment on any of their transactions with Russia and how it has impacted the Chinese businesses and relations. Receiving payments for firms exporting heavy equipment become difficult as they face stringent protocols. Bank of China (BOC) has blocked payments from Russian clients.
A listed company in Guangdong said that the company has opened several accounts in different banks but none agreed to accept payments from Russia. The biggest monopolies are now in a dilemma of their businesses with Russia as the slow process of collecting money does not prove to be good for the company’s liquidity management.