Chinese banks are shutting down transactions with Russia "en masse," with delays in payments intensifying during August, Reuters reported on Aug. 30, citing sources familiar with the matter.
The U.S. unveiled a new set of sanctions against Chinese and Russian companies over their support for Moscow's aggression last week. Despite efforts to avoid or mitigate the impact of the trade restrictions, Chinese institutions have begun scaling back their business dealings with Russia.
Specifically, a number of major Chinese banks have begun blocking transactions for electronics out of fear of secondary sanctions.
Transactions worth tens of billions of yuan are currently stuck in limbo, a source told Reuters.
It's just the latest case of mounting obstacles in Russian-Chinese economic relations amid the growing pressure of U.S. sanctions imposed over Moscow's full-scale invasion of Ukraine.
Trade between Russia and China has surged by 121% since 2021, underscoring China's role as Moscow's economic lifeline.
A functioning payment system is necessary for maintaining trade relations, and Russia was cut off from the international SWIFT system in 2022.
By mid-2024, Chinese banks were rejecting and returning about 80% of Russian payments made in Chinese yuan, the Russian state-controlled media outlet Kommersant reported on July 29, citing sources.
According to sources cited by Kommersant, Chinese banks routinely let Russian yuan payments delay for several weeks before ultimately rejecting them, often without providing a reason.
Some Russian businesses have begun using intermediaries in third countries in an attempt to circumvent Chinese compliance checks, but this adds time and cost to transactions.
Then in a further blow, it was reported that banks in the United Arab Emirates (UAE) have been rejecting transactions from Russian companies for electronic components and consumer electronics from China since early August.
According to Kommersant, Russian firms used UAE-based entities to transfer money to China to ship goods directly to Russia.
Now, transactions for those products that do not arrive directly to the Gulf country are blocked, the outlet said. According to its sources, the restrictions came at China's initiative.
The Kyiv Independent could not verify the claims.
Dominic Culverwell
