China’s exporters, eager for Russia foothold, tread lightly to avoid financial bear trap

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Chinese exporters selling to Russian clients have experienced more difficulties in payment processing as Western sanctions intensify

Only one Russian bank operates within China’s borders, and all transactions are under heavy scrutiny, causing long delays and frustrations for traders

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Chinese exporters are facing new difficulties doing business with Russian clients as Western sanctions continue to limit the scope of financial transactions. Photo: EPA-EFE

He Huifengin GuangdongandFrank Chenin Shanghai

Published: 6:00am, 24 May 2024Updated: 11:56am, 24 May 2024

In recent weeks, the 25th floor of the Shanghai Tower has been swarmed with Chinese exporters. Legions of businesspeople have flocked from all over the country to open a new account at VTB Bank – the only Russian bank currently in operation within China’s borders.

Among the crowd on Tuesday was Yeno Yan, an agricultural machinery manufacturer who had flown in from the eastern province of Shandong. Eager to clear up headaches caused by trying to collect payments from Russian clients – a common problem for Chinese traders in the years since hefty sanctions were imposed on Moscow over its February 2022 invasion of Ukraine – Yan instead found more frustration.

“We could only make arrangements for a rain check,” Yan said. “All of us hit a wall, unable to see anyone.”

Yan had hoped that his company could open an account at Chinese banks near the country’s northeast border with Russia. Those smaller banks, unlike the state-owned behemoths, seemed more willing to take the risk.

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Xi welcomes ‘old friend’ Putin to Beijing, affirms strength of China-Russia bond

“It’s too far away, and we’ve heard that they have also recently suspended forex services,” he lamented.

Chinese firms are doing their utmost to facilitate trade with Russian partners, which hit a record high of US$240 billion last year on strong domestic demand for Russian energy products and Russian purchases of Chinese cars, consumer goods and other products.

Many have had trouble with payment delays. Some smaller players are so cash-strapped and desperate they are beginning to ponder pulling out of the Russian market entirely.

Exports from China to its northern neighbour fell 15.7 per cent year on year in March, and a year-on-year drop of 13.6 per cent was recorded last month by China’s General Administration of Customs. For the period from January to April, the administration recorded a decline of 1.9 per cent year on year.