Some 80% of Russian payments to China returned amid increasing Western pressure

Chinese banks are returning approximately 80% of bank transfers in yuan made by Russian customers buying goods in China, state-affiliated business daily Kommersant reported on Monday.

Bank transfers can be held up for weeks at a time before a decision is reached on whether to approve it or not. The transfer can subsequently be cancelled without an explanation, which can lead to losses for the Russian customer in terms of exchange rate and commission.

It can now take a Chinese supplier as long as six months to receive payment for goods sold and exported to Russia, which has forced Russians wanting to buy goods to go via intermediaries at extra cost.

Problems began in December when US President Joe Biden issued an executive order that allowed Washington to impose sanctions on financial institutions facilitating prohibited transactions, according to Clyde and Co., a global law firm specialising in trade.

The situation became even more complex after the US imposed sanctions on the Moscow Stock Exchange in early June, Kommersant said, with a source telling the outlet that Chinese businesses were demanding more and more paperwork in their dealings with Russian clients.

“Clients are having to resort to intermediaries — payment agents or trading houses,” Oleg Ushakov of Sagrada Legal, a Russian law firm specialising in financial matters, told the newspaper.

A Kommersant source said agents now handle about 30% of payments between Russia and China, despite the fact that using an intermediary entails extra costs and an average commission of 3–5%, which can sometimes rise to 10%.

Chinese banks have tacitly begun to divide yuan associated with Russia into “dirty” and “clean” yuan, state-affiliated business daily Vedomosti reported on Friday, confirming cases of banks refusing to accept any yuan originating from Russia at all.