Chinese Banks Halting Transactions with Russia En Masse

In recent months, Russian companies have encountered increasing difficulties in conducting financial transactions with their Chinese counterparts, as delays and rising costs have impacted trade. According to Reuters, billions of yuan are currently stuck in limbo due to heightened scrutiny by Chinese banks. The delays and complications have intensified throughout August, exacerbating an already challenging economic environment for Russia.

The issues stem from Chinese banks tightening compliance measures in response to Western threats of secondary sanctions for engaging in transactions with Russia. As a result, transaction fees have surged to as much as 6%, compared to negligible costs earlier this year, according to sources.

This situation has particularly affected smaller Russian companies involved in the import of consumer goods from China. While large state companies and major exporters have managed to maintain smoother payment processes, smaller businesses are struggling. Some have resorted to using intermediaries in third countries to bypass compliance checks, further driving up costs and causing significant delays.

Despite the disruptions, bilateral trade between Russia and China has continued to grow, reaching $137 billion in the first half of 2024. However, Russia’s imports from China have seen a slight decline, with official statistics showing a more than 1% drop in the first seven months of the year due to payment issues.

China remains Russia’s largest trading partner, providing essential industrial equipment and consumer goods that help Russia navigate Western sanctions.