Russia Economy: Banks in China return payments for some shipped goods

Chinese banks are so focused on compliance that some payments were returned even after the goods reached Russian shores, she told the media.

The news came a week after the US Department of State and Treasury announced new sanctions against 400 individuals and entities for supporting Russia’s war effort in Ukraine. These include companies in China and Hong Kong.

China said it was “strongly dissatisfied” and “firmly opposes” the new restrictions.

Trade marks add to logistics costs

Even so, Chinese banks would rather be safe than sorry not to run afoul of secondary US sanctions.

It is not clear how Chinese exporters and their Russian customers solve the problems of rejected and returned payments if the goods have already been shipped and delivered. But imported goods spend more time in ports and warehouses, adding higher logistics costs, Kizevich told Izvestia.

Now, Chinese exporters will deliver goods to new customers in Russia only after payment is confirmed, Nikolai Dunaev, vice president of Opora Russia, an organization for small and medium-sized enterprises, told Izvestia. Prepayment for imports usually increases risks and affects cash flow for buyers.

But Russian businesses have bigger problems, as some Chinese banks fear the restrictions so much that they sometimes don’t process payments for unsanctioned goods, Dunaev told the newspaper. It also pays more attention to payments from Russia that go through third countries.

The Kremlin acknowledged the business community’s difficulties with payment transactions with China.

Kremlin spokesman Dmitry Peskov said Thursday that Moscow and Beijing were working on payments issues affecting trade, according to state news agency TASS.

“Trade and economic relations are abundant. With such volumes and such an unfriendly environment, it is impossible to avoid some problematic situations,” Peskov said.

Russia’s payments are rocking

Since the invasion of Ukraine, Russia and its trading partners have avoided sanctions by using smaller banks and other payment methods or non-US dollar currencies to circumvent the West’s ban on some Russian banks from the widely used SWIFT messaging system.

But the door has been closing on those solutions since December, when the US approved secondary sanctions targets financial institutions that aided Russia.

Russia is now rushing to settle alternative payment systemsincluding crypto, to facilitate trade.

Russia and China even planned to revive the old practice of barter trade to avoid Western sanctions, Reuters reported earlier this month.