China Chouzhou Commercial Bank, which had become a preferred partner for Russian importers amid sanctions, halted all agreements with Russian customers, according to three business sources cited by Vedomosti as financial advisors and industry associations.
That move led to widespread deal failures for many operators, a confidential entrepreneur told the newspaper.
In December 2023 the bank notified its clients that it would not provide payment services for goods whose import into Russia is sanctioned. A businessman from Izhevsk who buys machine tool equipment from China confirmed this to the publication.
Within weeks the bank informed the entrepreneur that all payments to Russia had ceased, regardless of the goods category, payment system, or currency used. SWIFT transfers and transfers through Russian SPFS or Chinese CIPS were suspended.
Other sources indicated that the Chinese side also cut ties with organizations not only from Russia but also from Belarus, a development the bank reportedly communicated to customers last week.
Denis Rudenko, head of customs practice at the Moscow law firm Ri-Consulting, noted that in early February Chouzhou Bank began returning payments from Russian banks, saying it no longer complied with the internal rules of the recipient bank. He stressed that this applied solely to transit operations.
The decision to halt settlements adds to the challenges, according to Vedomosti. With the approaching Chinese New Year, the country typically observes a long holiday from February 10 to 17, which could leave goods from Russian importers delayed abroad until March.
Why is this bank significant for Russia?
Chouzhou Commercial Bank attracted many domestic importers with its relatively lenient compliance checks, meaning it assesses existing or potential clients in a more permissive way. Its headquarters in Yiwu, a major logistics hub for China’s exports to Russia, reinforces its role in the trade system.
A businessman from Izhevsk also noted that other Chinese lenders have tightened controls. Another bank reportedly closed a company’s foreign currency account, converting all transactions to yuan, and intensified verification of transfers. Now the Russian side must prove its reliability, ensuring buyers have no sanctioned connections and that products are not intended for the Russian defense sector or Crimea.
The unnamed Russian businessperson did not reveal which bank was involved, but he indicated it was among China’s three largest lenders.
A representative of Opora Rossii, Ilona Gorsheneva-Dolunts, stated that nearly all Russian importers have shifted away from dollars toward yuan, though this did not shield them from tighter scrutiny. Chinese banks now supervise yuan transfers more closely.
What is the reason
Chinese banks began tightening dealings with Russian clients in mid-January, a trend noted by Bloomberg. This followed the new U.S. sanctions order.
President Joe Biden, on December 22 of the previous year, authorized secondary sanctions against foreign banks that assist or work with sanctioned Russian companies. U.S. Treasury Secretary Janet Yellen described the move as a powerful tool against the Russian military machine.
Bloomberg sources reported that, in this climate, Chinese financial institutions stepped up scrutiny of their customers. Banks were ready to sever ties with any company linked to the Russian military-industrial complex or affected by sanctions, regardless of currency or location. Transfers in third-country routes were also to be examined more carefully.
Vedomosti cited that at least three of China’s big four banks tightened oversight, naming Bank of China, China Construction Bank, and Industrial and Commercial Bank of China.
Iskender Mirgalimov, a foreign trade agreements consultant, commented that relying on the SWIFT alternative does not solve all problems. Even when transfers pass through China’s CIPS, SWIFT still questions transactions with Russia. Some Chinese banks do not depend solely on Russian SPFS and use multiple systems, a practice described as risky and potentially competitive among providers.
Sergei Tsyplakov, a professor at the Higher School of Economics, noted that the largest Chinese banks maintain branches abroad, including in the United States and the European Union. He commented that China’s political will tends to protect its own interests.
Still, a Vedomosti source suggested that not all is bleak, since payments continue, albeit at a slower pace.
For those seeking to buy Chinese-made products, the option remains, but with payments spread out over time. Using Chinese banks as a transit hub to purchase in dollars or euros is becoming impractical, according to the paper’s interviewee.
A representative from Opora Rossii noted that Russian businesses have faced repeated audits from Chinese banks, causing delays but not a complete halt to operations yet.