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For the last six months, friendly China has become quite unfriendly to Russia. Chinese banks began to block payments from Russia. Most recently, Russian companies have difficulties with money transfers for components for the assembly of electronics. Payments are blocked even from companies that have long-term contracts. Read about why it is not yet possible to localize the production of electronic sensors and microcircuits in Russia, as well as where Tatarstan businesses plan to purchase the electronics they need, in the BUSINESS Online material.

Chinese duplicity

Russian business faced new challenges in April. Chinese banks began blocking payments to Russian entities for electronic components purchased from Chinese manufacturers for various assemblies. Since the end of March, domestic electronics manufacturers have received letters from Chinese partners stating that the payment from the Russian entity through Chinese banks has not passed. Banks have started to block payments for supplies of components and kits for assembly of electronics (kits include processors, device cases, screens), including servers, storage systems, laptops, said «Kommersant» with a link to market participants.

The reason is the same - it is the influence of the US on Chinese financial structures, which threatens sanctions in case of detection of cooperation with Russian entities. Note that the December updates of the sanctions packages from the US and the EU were aimed at those who help the Russian Federation to bypass the restrictions. After that, Chinese banks, whose capital is controlled by US shareholders, stopped working completely with Russian banks. The remaining banks increased fees for transfers, as well as increased compliance control over all incoming payments from Russian counterparts.

Those banks that still work with Russian clients began to delay payments for a period of three weeks or more. If in December difficulties with payment concerned the purchase of finished products - servers, laptops, data storage systems, now the matter has already affected the components. Thus, from the beginning of April, payments intended “for electronic components” first “hung” for a long time in processing, and then began to be returned to payers. Chinese credit institutions explain the refusal to make payments to Russian clients by “internal company policy” or by the fact that the payment “does not comply with the internal rules of the recipient bank.”

Banks that still work with Russian clients have seriously complicated the verification of transfers and now oblige Russian counterparties to confirm their reliability. Customers who still want to pay for goods in China are now forced to fill out a special questionnaire where they need to indicate the customs code of the goods being purchased, the country of origin of the goods, but most importantly, to clarify whether the goods being purchased are related to dual-use or military goods and whether the transfer is related with the delivery of goods to Crimea, Izvestia writes. In addition, the buyer of the goods must not contact sanctioned persons and companies or have any relationship with them. In addition to this, the checks also affected non-resident companies that operate in Russia or transport critical goods to the Russian Federation through third countries.

According to a representative of a company that regularly purchases from China, businesses now have to respond several times to audits of Chinese banks. Firstly, this leads to delays, secondly, it is not a fact that after such thorough verification payment will be missed, thirdly, all this has increased the cost of international banking transactions for Russian business.

Is China fighting against the Russian military machine with the help of the US? 

The difficulties began in December 2023, after US President Joe Biden on December 22 authorized secondary sanctions against foreign banks that help or work with Russian subsidiaries. US Treasury Secretary Janet Yellen called this decision «a new and powerful tool against the Russian military machine».

“In December 2023, the American regulator gathered the heads of Chinese banking organizations and threatened to impose sanctions against them if cooperation with Russian legal entities was revealed. Therefore, the prospects are not bright yet,” Lenta.ru reports the words of the chairman of the Russian-Asian Union of Industrialists and Entrepreneurs (RASPP) Vitaly Mankevich.

At that time, Chinese banks stopped making any payments in dollars with counterparties from the Russian Federation, since these transactions were easy to track in the United States. Later, Chouzhou Commercial Bank stopped settlements with Russia in yuan. In addition, the three largest banks in China - Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China - have stopped accepting payments from sanctioned Russian banks since the beginning of the year. At the beginning of March, Bank of Kunlun sent out a notice to all its partners and clients indicating that the bank’s acceptance of payments from the Russian Federation would be suspended from March 22.

At the end of March, Ping An Bank and Bank of Ningbo (ranked 13th and 15th in terms of capitalization, respectively), as well as China Guangfa Bank, Kunshan Rural Commercial Bank, Great Wall West China Bank, Shenzhen Rural Commercial Bank were added to the list of banks, Dongguan Rural Commercial Bank, China Zheshang Bank. 

In addition, Chinese banks with international participation have stopped calculating the yuan. CitiBank, Standard Chartered Bank, HSBC, JP Morgan, BNP Paribas, Deutsche Bank and Mizuho Bank. Some banks in China stopped opening accounts for companies whose management included Russian citizens.

In addition, the processing time of payments from Russia to Kazakhstan has recently been significantly increased. Local credit organizations have begun to test counterparties more actively in our country, fearing that they will also fall under secondary sanctions. 

According to a representative of one of the companies that regularly purchases electronics for the needs of the public sector, the scheme with the opening of a branch, for example, in the same friendly Kyrgyzstan, began to collapse. It is impossible to recall the fact that Russian cards stopped working in Kyrgyzstan on April 5 - due to anti-Russian sanctions adopted by the United States. Then restrictions were introduced against the payment system operator - JSC National Payment Card System. 

According to the speaker, in order to work through Kyrgyzstan, you need, firstly, a company created before February 2022, which has no traceable connections with Russian companies and founders, and secondly, another company through which the goods will be sent to Russia. This makes the purchase so expensive that the issue is currently being worked out with a company from Taiwan. 

«Business cannot stand idle...» 

Chairman of the Board of Directors of Information Systems LLC Marat Bikmullin said that the business had problems for a long time, but at the beginning of 2024 the situation began to escalate. Chinese banks began to explain the delay in making payments by compliance control. The bank, according to Bikmullin, checks the sources of money, the authorization of the goods, and also whether “we are engaged in financing terrorism.” According to the speaker, in some cases payment verification took up to three months, and some payments that did not pass verification were returned. 

Business cannot stand idle, so our company will in any case order goods from China, both directly and through intermediaries. Chinese companies also have to sell, and sometimes they ship the goods before they receive payment. As for the product, the inspections have now touched all electronics, even if it is components to the washing machine: maybe it with wings" goes», - complained Bicmullin.

Pavel Shatskikh, General Director of Elektropribor JSC explained to the publication that the enterprise does not import anything directly (for obvious reasons), there are no problems with the supply of components yet, but now we need to think about creating reserves. In addition, Shatskikh believes that some of the electronics can be supplied from other countries, such as Vietnam or Taiwan, in some areas their competence is even higher than that of China. But it is worth remembering that the price of such components will depend on the volume of restrictions - the more restrictions, the higher the price.

“In the global market, certain sensors and chips are produced by two or three companies throughout the world. Take Taiwan for example - they have a 100% monopoly on automotive component sensors. When a flood or earthquake happens there, the whole world feels it,” notes the manager. As for the localization of production in Russia, the main reason is the price. “Responsible cost can only be achieved with billions of components produced. Even if we take the entire Russian market, this is a drop in the bucket. A local company contradicts common sense, on the one hand. On the other hand, we haven’t worked on electronics for 30 years, and now it’s not possible to jump from the 19th to the 21st century,” he summarized. 

“It happened gradually. First one bank refused, then a second and a third.”

The general director of the Kazan company Infomatika, David Tartakovsky, also believes that the whole point is the fear of Chinese banks of secondary sanctions from the United States. “The problem with payment specifically affected banks - they don’t care whether it’s electronics or not. Payments from Russia to China after the last set of sanctions do not pass», he explains.

Tartakovsky’s company is engaged in the installation of turnstiles and other security systems. From China «Infomatica» buys a lot of electronic components, such as gearboxes and electric motors. The company has four yuan accounts in Chinese banks - all of them have stopped accepting payments from Russia without explanation. «It happened gradually. First one bank refused, then the second and third», - he says.

Now the CEO is counting on intermediaries in other countries. He says they will work with Turkey, Kyrgyzstan. 

Director of LLC «RIM» Ilya Fomin, who performs services in the sphere of outdoor advertising, also faced problems with payment for deliveries for electronic Chinese goods. He says they have a company that supplies screens. She started having trouble two or three weeks ago - she can’t make a payment from Russia. 

Fomin says that it is now necessary to look for small banks to work with China. In any case, with a complete ban from Asian partners, the work will not stop: There are companies in Kazakhstan, which are also distributors, we will switch to alternative stories. We will either find other suppliers who can accept the money, or we will find intermediaries.

Source: https://www.business-gazeta.ru/article/630163?ysclid=lv3kshn736464633499