Russian banks are now asking local importers for receipts confirming their payments to Chinese business partners were approved by banks in the East Asian country, according to local media.
The development marks another obstacle in trade between the two countries, already complicated by U.S. secondary sanctions imposed to deprive Moscow of supplies that could fuel its war against Ukraine.
Though bilateral trade between the world’s second and 11th-largest economies soared to new heights in 2022 and 2023, merchants have reported mounting complications this year as Chinese banks took steps to avoid U.S. secondary sanctions, delaying and increasingly rejecting payments from Russia.
This trend accelerated last month, with Russian media quoting traders as saying 98 percent of Chinese banks were rejecting yuan-denominated transactions from Russia.
Bank of China branch in Moscow. Russian media has reported local banks have started asking merchants for proof cross-border payments were approved by Chinese lenders.
Kirill Kudryavtsev/AFP via Getty Images
Russian daily business newspaper Vedomosti reported on Tuesday that at least some Chinese exporters must now contact their local banks to confirm Russian partners’ payments will be accepted.
Alexey Poroshin, CEO of the First Group consulting company, told the newspaper that the issue affects those Russian banks that can still facilitate direct payments to Chinese lenders, not the ones that must rely on intermediaries for transactions.
This is bad news for Russian importers, presenting further delays amid volatility with the country’s most important trade partner.
Hit with unprecedentedly punishing sanctions in the wake of President Vladimir Putin‘s 2022 invasion of Ukraine, Russia’s economy has become increasingly dependent on trade with China, both for products like electronics and cars and sales of oil and natural gas, which Beijing purchases at a steep discount.
The Russian finance ministry and Chinese foreign ministry did not immediately respond to written requests for comment.
Trade turnover between the neighbors soared to a record high of $240 billion in 2023. However, it has been more erratic this year as payment issues began to take their toll, with Yuan-denominated exports to Russia dropping by 3 percent in July after inching upward in May and June.
The trade difficulties have prompted Chinese suppliers to seek a workaround to ship their goods through friendly third countries such as Russia’s partners in Central Asia, Russian media reported in August.
This pivot strengthens a trend that analysts say has been in place since at least the beginning of the war.
U.S. think tank The Atlantic Council in June pointed to United Nations Comtrade and Chinese government data that showed Kazakhstan imported twice as many cars in 2021 as in 2023. Many of these vehicles were likely destined for Russia, the think tank wrote.
