An appliance manufacturer in southern China is having difficulty shipping its goods to Russia—not because there are issues with the devices, but rather because China's major banks are blocking payments for these kinds of transactions due to worries about U.S. sanctions.
The founder of the Guangdong-based firm, Wang, who wanted to only be recognised by his family name, stated that the company is thinking of employing currency brokers operating along China's border with Russia to settle payments for its electrical items.
Since Russia's invasion of Ukraine in 2022, the United States has implemented a number of sanctions on the nation and its companies.
The possibility of extending these to Chinese banks, which Washington accuses of "powering" Moscow's war effort, is now chilling the financial flow that supports even non-combative commerce between China and Russia.
According to seven banking and trading sources with knowledge of the matter, this is becoming an increasingly significant issue for small Chinese exporters.
According to individuals who spoke to Reuters, some Chinese businesses are resorting to minor banks across the border and unofficial funding sources like money brokers and even outlawed cryptocurrencies as China's major banks withdraw from funding transactions involving Russia.
According to the reports, some have completely withdrew from the Russian market.
Wang said that he was forced to use unconventional payment methods or scale back his company because "you simply cannot do business properly using the official channels," as major banks are now taking months instead of days to process payments from Russia.
This is due to the fact that it is constructed of wheat straw rather than plastic and includes seeds tucked within.
Wang claimed that a manager at a sizable state-owned bank he had previously worked with had informed him that the institution was concerned about potential US penalties while handling deals with Russia.
One of China's Big Four state banks, according to a banker there, has increased oversight of companies with ties to Russia in order to reduce the danger of penalties. The banker, who wished to remain anonymous, stated, "The primary goal is to prevent needless problems."
According to the sources, Chinese banks have either stopped doing business completely or increased their inspection of transactions pertaining to Russia since last month in order to avoid being singled out by US sanctions.
The president of a trade organisation in a region in the southeast that represents Chinese companies with Russian interests predicted that more and more economic dealings between China and Russia will take place behind closed doors. "But these methods carry significant risks."
A Russian banker in Moscow stated that since "it's impossible to pass through KYC (know-your-customer) at Chinese banks, big or small," making payments with cryptocurrency—which has been outlawed in China since 2021—might be the only choice.
The sources mentioned the sensitivity of the subject while speaking under anonymity. The amount of transactions that had moved from large banks to less well-known channels could not be ascertained by Reuters.
A spokeswoman for China's foreign ministry stated that the government is "the relevant authorities" and is unaware of the payment arrangements procedures outlined by the businesses or any issues with paying payments through major Chinese banks.
Requests for comment from Reuters were not answered by the People's Bank of China or the nation's banking sector regulator, the National Financial Regulatory Administration.
After spending five and a half hours in Beijing with China's senior diplomat, Wang Yi, U.S. Secretary of State Antony Blinken stated that he had voiced "serious concern" that Beijing was "powering Russia's brutal war of aggression against Ukraine".
Nevertheless, his visit—which included a meeting with President Xi Jinping—was the most recent in a string of actions meant to reduce the public hostility that last year brought the world's largest economies' relations to all-time lows.
A U.S. official told Reuters last week that Washington does not yet have a plan to implement such measures, despite warnings that Washington was prepared to take action against Chinese financial institutions facilitating trade in goods with dual civilian and military applications and that Washington has tentatively discussed sanctions on some Chinese banks.
A spokesman for the Chinese foreign ministry declared, "China rejects any unlawful, one-sided sanctions. No third party has the ability to impede China and Russia's regular commercial cooperation."
When questioned by Reuters on the impact on some Chinese firms and the evidence that Chinese banks were reducing payments from Russia, a State Department spokeswoman stated, "Fuelling Russia's defence industrial base not only threatens Ukrainian security, but also European security."
"Beijing cannot achieve better relations with Europe while supporting the greatest threat to European security since the end of the Cold War," a spokeswoman stated.
"That ensuring transatlantic security is a core U.S. interest," the spokeswoman said Blinken made plain to Chinese officials. "The United States will address this issue if China does not."
Since the beginning of March, almost all significant Chinese banks have stopped accepting payments from Russia, according to a management at a Guangdong-based listed electronics business.
Following Russia's invasion, several of the largest state-owned lenders reported declines in activity tied to Russia, reversing a spike in assets.
According to their most recent reports, two of the Big Four, China Construction Bank and Agricultural Bank of China, reported a 14% and 7% decrease in assets respectively for their Russian subsidiaries last year.
The largest lender in the nation, Industrial and Commercial Bank of China, on the other hand, revealed a 43% increase in the assets of its Russian division. The fourth-largest bank, Bank of China (BOC), withheld the breakdown.
Requests for comments about their operations in Russia and the effect on Chinese enterprises were not answered by the four banks.
There is still payment collection capacity in certain rural banks in northeast China near the Russian border, but this has created a backlog; entrepreneurs claim they have been waiting months to open accounts.
According to Liu, a worker at the company who also wanted to be named by family name, a chemical and machinery company in Jiangsu province has been waiting for three months to create an account with Jilin Hunchun Rural Commercial Bank in the northeastern province of Jilin.
Requests for comments were not responded when calling the bank.
Since February, BOC has prevented Liu's Russian clients from making payments. According to a bank loan officer, companies that export heavy machinery must pass more rigorous inspections before being paid, according to Liu.
The management of the publicly traded Guangdong company stated that since last month, their company has opened accounts at seven banks, but none of them have consented to take payments from Russia.
The manager stated, "We gave up on the Russian market." "We ultimately gave up when the Russian side failed to pay us more than 10 million yuan ($1.4 million). Receiving money is a somewhat irksome procedure."
Wang is reconsidering his business venture in Russia as well.
"I may gradually shrink my business in Russia as the slow process of collecting money is not good for the company's liquidity management," he stated.
Furthermore, you have no idea what the future holds. One day, the waterway could be entirely closed."
(Source:www.reuters.com)
The founder of the Guangdong-based firm, Wang, who wanted to only be recognised by his family name, stated that the company is thinking of employing currency brokers operating along China's border with Russia to settle payments for its electrical items.
Since Russia's invasion of Ukraine in 2022, the United States has implemented a number of sanctions on the nation and its companies.
The possibility of extending these to Chinese banks, which Washington accuses of "powering" Moscow's war effort, is now chilling the financial flow that supports even non-combative commerce between China and Russia.
According to seven banking and trading sources with knowledge of the matter, this is becoming an increasingly significant issue for small Chinese exporters.
According to individuals who spoke to Reuters, some Chinese businesses are resorting to minor banks across the border and unofficial funding sources like money brokers and even outlawed cryptocurrencies as China's major banks withdraw from funding transactions involving Russia.
According to the reports, some have completely withdrew from the Russian market.
Wang said that he was forced to use unconventional payment methods or scale back his company because "you simply cannot do business properly using the official channels," as major banks are now taking months instead of days to process payments from Russia.
This is due to the fact that it is constructed of wheat straw rather than plastic and includes seeds tucked within.
Wang claimed that a manager at a sizable state-owned bank he had previously worked with had informed him that the institution was concerned about potential US penalties while handling deals with Russia.
One of China's Big Four state banks, according to a banker there, has increased oversight of companies with ties to Russia in order to reduce the danger of penalties. The banker, who wished to remain anonymous, stated, "The primary goal is to prevent needless problems."
According to the sources, Chinese banks have either stopped doing business completely or increased their inspection of transactions pertaining to Russia since last month in order to avoid being singled out by US sanctions.
The president of a trade organisation in a region in the southeast that represents Chinese companies with Russian interests predicted that more and more economic dealings between China and Russia will take place behind closed doors. "But these methods carry significant risks."
A Russian banker in Moscow stated that since "it's impossible to pass through KYC (know-your-customer) at Chinese banks, big or small," making payments with cryptocurrency—which has been outlawed in China since 2021—might be the only choice.
The sources mentioned the sensitivity of the subject while speaking under anonymity. The amount of transactions that had moved from large banks to less well-known channels could not be ascertained by Reuters.
A spokeswoman for China's foreign ministry stated that the government is "the relevant authorities" and is unaware of the payment arrangements procedures outlined by the businesses or any issues with paying payments through major Chinese banks.
Requests for comment from Reuters were not answered by the People's Bank of China or the nation's banking sector regulator, the National Financial Regulatory Administration.
After spending five and a half hours in Beijing with China's senior diplomat, Wang Yi, U.S. Secretary of State Antony Blinken stated that he had voiced "serious concern" that Beijing was "powering Russia's brutal war of aggression against Ukraine".
Nevertheless, his visit—which included a meeting with President Xi Jinping—was the most recent in a string of actions meant to reduce the public hostility that last year brought the world's largest economies' relations to all-time lows.
A U.S. official told Reuters last week that Washington does not yet have a plan to implement such measures, despite warnings that Washington was prepared to take action against Chinese financial institutions facilitating trade in goods with dual civilian and military applications and that Washington has tentatively discussed sanctions on some Chinese banks.
A spokesman for the Chinese foreign ministry declared, "China rejects any unlawful, one-sided sanctions. No third party has the ability to impede China and Russia's regular commercial cooperation."
When questioned by Reuters on the impact on some Chinese firms and the evidence that Chinese banks were reducing payments from Russia, a State Department spokeswoman stated, "Fuelling Russia's defence industrial base not only threatens Ukrainian security, but also European security."
"Beijing cannot achieve better relations with Europe while supporting the greatest threat to European security since the end of the Cold War," a spokeswoman stated.
"That ensuring transatlantic security is a core U.S. interest," the spokeswoman said Blinken made plain to Chinese officials. "The United States will address this issue if China does not."
Since the beginning of March, almost all significant Chinese banks have stopped accepting payments from Russia, according to a management at a Guangdong-based listed electronics business.
Following Russia's invasion, several of the largest state-owned lenders reported declines in activity tied to Russia, reversing a spike in assets.
According to their most recent reports, two of the Big Four, China Construction Bank and Agricultural Bank of China, reported a 14% and 7% decrease in assets respectively for their Russian subsidiaries last year.
The largest lender in the nation, Industrial and Commercial Bank of China, on the other hand, revealed a 43% increase in the assets of its Russian division. The fourth-largest bank, Bank of China (BOC), withheld the breakdown.
Requests for comments about their operations in Russia and the effect on Chinese enterprises were not answered by the four banks.
There is still payment collection capacity in certain rural banks in northeast China near the Russian border, but this has created a backlog; entrepreneurs claim they have been waiting months to open accounts.
According to Liu, a worker at the company who also wanted to be named by family name, a chemical and machinery company in Jiangsu province has been waiting for three months to create an account with Jilin Hunchun Rural Commercial Bank in the northeastern province of Jilin.
Requests for comments were not responded when calling the bank.
Since February, BOC has prevented Liu's Russian clients from making payments. According to a bank loan officer, companies that export heavy machinery must pass more rigorous inspections before being paid, according to Liu.
The management of the publicly traded Guangdong company stated that since last month, their company has opened accounts at seven banks, but none of them have consented to take payments from Russia.
The manager stated, "We gave up on the Russian market." "We ultimately gave up when the Russian side failed to pay us more than 10 million yuan ($1.4 million). Receiving money is a somewhat irksome procedure."
Wang is reconsidering his business venture in Russia as well.
"I may gradually shrink my business in Russia as the slow process of collecting money is not good for the company's liquidity management," he stated.
Furthermore, you have no idea what the future holds. One day, the waterway could be entirely closed."
(Source:www.reuters.com)
