Russian Companies Seeking To Open Yuan Based Accounts In Chinese State Banks Operating In Moscow – Reports
Western sanctions on the banking industry of Russia because it invaded Ukraine have hit Russian companies. According to a report published by Reuters, a wave of inquiries into the Moscow branch of a Chinese state bank is being received from many Russian firms seeking to open banking accounts.
“Over the past few days, 200-300 companies have approached us, wanting to open new accounts,” the report quoted a source working at the Moscow branch of the Chinese state bank and with direct knowledge of the matter.
The report did not name the source or identify the Chinese bank.
The report also clarified that the extent of demand for the opening of new accounts at Chinese banks by Russian companies was unclear at the moment. The report, however, confirmed the growing interest among Russian companies to open new accounts to do business with China, and there is an expectation of a surge in transactions in yuan by such Russian companies.
Sanctions by Western countries have targeted the Russian banking system and aimed at cutting off the Russian economy from the global financial system, which has forced international companies to close down sales in Russia and exit the market while abandoning investments in the country worth tens of billions of dollars.
China has repeatedly opposed the Western sanctions on Russia. Beijing termed the sanctions ineffective while stressing that Beijing will continue with normal economic and trade exchanges with Moscow.
Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank are among the few Chinese state-owned banks are operational in Russia.
There were no comments in the Chinese state banks operating in the Moscow report.
The report also quoted a Chinese businessman who has long-term ties with Russia saying that several Russian companies he does business with are contemplating opening yuan banks accounts.
“It’s pretty simple logic. If you cannot use U.S. dollars or euros, and the U.S. and Europe stop selling you many products, you have no other option but to turn to China. The trend is inevitable,” the source told Reuters.
An increasing number of Western companies are exiting the Russian market. At the same time, there is a discernable willingness among some of the largest emerging economies like China to maintain regular commercial ties with Russia showing a significant schism over Europe’s worst crisis since WWII. This trend also could result in the erosion of the predominance of the U.S. dollar in international trading.
Earlier this week, a large transport and logistics company of Russia, FESCO Transportation Group, said that its customers could pay it in Chinese yuan following the banning of some Russian banks from the global financial messaging system SWIFT.
“It’s natural for Russian companies to be willing to accept yuan,” said Shen Muhui, head of a trade body that promotes links between Russia and China.
On the other hand, small Chinese exporters are suffering from the historic devaluation of the rouble, and many have halted delivery to prevent potential losses, he added.
On Wednesday, the Russian currency hit a new low of more than 17 roubles per yuan, and it has lost more than 40% of its value against the Chinese currency within just the previous week.
“Companies will be switching to yuan-rouble business, but in any case, things will become two, three or four times more expensive for Russians because the exchange rate between the yuan and rouble is also changing,” said Konstantin Popov, a Russian entrepreneur in Shanghai.
However, in the long term, there will be continued growth in demand for Chinese goods, Shen said. “The key is to solve trade settlement issues” in the face of sanctions, he said.