China deployed payments to the east

The Russian subsidiary of the Chinese group Bank of China has stopped accepting payments from Russian banks, including in yuan, sent to Europe and the United States. The channel for transferring yuan to China remains. Kommersant’s experts note that the restriction may become significant: due to the wide network of correspondent accounts in Europe, Chinese banks have so far largely served as a “transport hub” for transferring funds.

Some Russian banks have announced restrictions on foreign currency transfers in yuan through the Bank of China (Russia). In particular, Unicredit Bank announced on June 16 that from June 13, the Chinese partner will not accept payments to clients in EU, US, Swiss, and UK banks, including foreign branches of banks in these countries. The only exception was payments in favor of customers of the Bank of China group. According to the media and Telegram channels, BBR Bank, Finam Bank, Modulbank and Akibank have already been notified of similar restrictions.

Many Russian banks, including systemically important ones, have (or used to have) correspondent accounts with the Russian subsidiary of Bank of China, such as Gazprombank and RSHB. It was not possible to find out whether they were affected by the restrictions over the weekend.

Some domestic banks operate through subsidiaries of other Chinese banks. Kommersant has not yet found evidence that they have also restricted the transfer of funds to Western countries.

For example, Derzhava Bank works with Harbin bank and the Asia-Pacific Bank (ATB). As Kommersant was told in Derzhava, there were no letters from correspondent banks about any bans. “It can be assumed that it is Bank of China that has problems, and they are not related to sanctions against Russia,” says Alexei Skorodumov, chairman of the board of Derzhava Bank. “Apparently, the Chinese bank adheres to a policy of limiting external transfers.”

Sberbank customers, they explained, can transfer yuan to their accounts in other Russian banks “in accordance with the currency legislation of the Russian Federation.” In one of the banks working with ICBC (Commercial and Industrial Bank of China), “Kommersant” said that “as of Friday there were no problems.” It was not possible to contact the partners of the Agricultural Bank of China and others, “Kommersant” on Sunday.

Although the restrictions have so far affected only a number of players, “in general, this is an unpleasant signal for the market,” Kommersant’s interlocutors among bankers say. “In the modern world there are no clear formal rules, now everyone acts in accordance with their understanding of the issue and their appetite for risk. Channels for transferring yuan from Russia to other countries have existed for a long time and have been working effectively,” says Viktor Dostov, head of the Association of Electronic Money and Money Transfer Market Participants. “The current movements, as we understand it, are associated with the fear of secondary sanctions. Formally, if you transfer Chinese yuan from an unsanctioned bank or person, then there are no restrictions, but if there is a transfer from a sanctioned bank or person and the Chinese bank misses, this will potentially bring him big problems.” In such a situation, the expert believes, “it’s easier to close transfers than run into sanctions.”

According to Mr. Dostov, the advantage of Chinese banks was that they have many correspondents in Europe: this allows them to use credit organizations as a “transport proxy hub”. Settlements with China will not be affected by the restrictions, but the possibility of transfers to other countries will suffer. “For Europe and the US, the channel through the Bank of China is now closed. This is also a signal that China’s loyalty is in fact limited,” the expert adds.

Last week, on the sidelines of the SPIEF, Deputy Chairman of the Central Bank Olga Skorobogatova announced an almost fivefold increase in financial messages through the SPFS. Over the five months of 2023, the number of transactions increased by 4.6 times compared to the same period last year, in absolute terms, 82 million messages were processed in January-May of this year. “This is a huge increase,” she said. At the moment it is more than 120 foreign organizations from 14 countries.

“Probably, there are Chinese banks connected to the Russian analogue of SWIFT – SPFS (the system for transmitting financial messages of the Bank of Russia; the list of countries and financial organizations is not publicly disclosed.— “b”), but this will help to a limited extent when transferring yuan outside of China,” Mr. Dostov clarifies. “SPFS, most likely, can effectively solve the issue of transferring money to China, despite the fact that this system is closed from external monitoring. However, for transfers outside of China to “unfriendly” countries, for example, when transferring money to Europe, it does not give anything.

Olga Sherunkova