On August 22, Russia’s Interfax news agency published excerpts of a new communique between Moscow and Beijing focused on financial cooperation. The communique said that the two countries have agreed to strengthen and develop payment and settlement infrastructure, including through opening correspondent accounts and bank branches and subsidiaries in both countries. “The sides will create proper conditions and support mutual investments, enable Russian and Chinese entities to draw funds on the security markets of both countries by commercial methods, and provide relevant infrastructure based on market principles,” it added.
The timing of this new communique is interesting indeed. About a week ago, there was a media report that alleged that 98% of Chinese banks — including small regional ones — are refusing to accept direct Chinese payment transfers from Russia. The source of the allegation is Alexey Razumovsky, the commercial director of payments company Impaya Rus.
Meanwhile, the U.S. Treasury Department on Friday imposed sanctions on more than 400 entities and individuals that support Russia's war efforts in Ukraine, including Chinese companies that it said were helping Moscow evade Western sanctions by shipping machine tools and microelectronics. With regards to the idea of establishing a sanctions-busting financial network between the two countries, U.S. Deputy Treasury Secretary Wally Adeyemo told the Financial Times that Washington “We will go after the branch they’re setting up, but also the other entities and the companies in your jurisdiction that work with them.”
Nonetheless, trade between China and Russia has surged in the past few years. Amid the growing economic connections between Moscow and Beijing, the annual value of bilateral trade has reached $240 billion, according to Chinese customs data. Chinese exports to Russia in 2023 exceeded $111 billion: 67 percent more than in 2021. And Chinese goods now account for 38 percent of Russia’s imports, while 31 percent of Russia’s exports go to China.
The Carnegie Russia Eurasia Center estimates that Russia’s shift to using yuan in foreign trade has been dramatic. In December 2023, about 1/3 of Russia’s foreign trade was regularly settled in yuan. There was US$68.7 billion held in yuan in Russian banks in 2023, greater than the US$64.7 billion held in U.S. dollars. The value of yuan-denominated loans in Russia has more than tripled to $46.1 billion, while the share of yuan in trades on the Moscow Exchange in 2023 was 42%, exceeding that in the U.S. dollar.