80% of financial payments between China and Russia have been established
Amid President Vladimir Putin’s visit to China, Beijing admitted that Western sanctions led to the suspension of 80% of payments with Russia as of for March. This was reported by the South China Morning Post, citing a report from the Chongyang Institute of Financial Research at the People's University of China. About how much bilateral trade loses from problems in payments and how the problem can be solved without regard to Western threats, «MK» experts said.
Vladimir Putin directly stated that problems in remittances are hampering the growth of trade between Russia and China during his first visit to Beijing after the inauguration. “Can Russian-Chinese cooperation somehow resist this (sanctions)? Maybe. But in order to prevent this from happening, they interfere with the financial posting. Because we could buy more. But, since they create problems in money transfers, we are limited in purchasing these products,” — the head of state emphasized, speaking on May 17 at a press conference following his visit to China.
The point is that without the payment problem, mutual trade turnover would have grown even faster than in the last two years. Let us recall that at the end of 2023, the trade turnover between the Russian Federation and China amounted to about $240 billion, and if there were no problems with payments, perhaps it would have reached $300 billion or even more at the end of last year. “In the long term, if restrictions continue, the problem with payments may turn out to be more sensitive for both Russian and Chinese businesses, so after 2025 there may be a significant slowdown in the growth of mutual trade,” &ldash; warned Freedom Finance Global leading analyst Natalya Milchakova.
This year there are also warning signs. According to data from the General Administration of Customs of China, in the first quarter of 2024, exports from Russia to China grew by 7.3% ($32.25 billion), and in the opposite direction — by 2.6% ($24.43 billion). The cumulative growth in trade between the two countries was 5.2% ($56.68) compared to the same period last year. At the same time, if you look at the previous two spring months, it is not surprising that the situation causes concern among the “powers of this world.” In March-April, the decrease in Chinese supplies to Russia amounted to 16% and 13%, respectively, according to the General Administration of Customs of the People's Republic of China, which is also due to problems that arose during that period in the field of mutual payments between the two countries. And simple solutions are not suitable here.
“Using a separate payment system will not solve the problem, — says Sergei Solovykh, head of the department for working with wealthy clients at Fontvielle Investment Company. — Large banks, fearful of secondary sanctions after the appearance of Biden’s decree at the end of December 2022, opaquely hinting at possible consequences, will seek to avoid transactions that are problematic for them.” However, the Chinese banking system is the largest in the world, not only in terms of the volume of assets available to banks, but also in terms of the number of participants. This feature can and should be used when building bilateral relations. And, if for systemically important financial and credit institutions, working with Russian partners carries additional risks, then small regional banks may well take on this function, Solovykh is sure.
The problem of dependence of international payments on the American payment system still exists, which means that all necessary actions are being taken to solve it. “Globally,” China and Russia continue to work on creating an independent financial infrastructure that could function within the entire association of BRICS allied countries, — says Associate Professor of the Department of Economic Theory of the Russian Economic University. Plekhanova Ekaterina Novikova. — This process requires considerable time: the American payment system has been built over decades, and the Chinese-Russian payment system is developing before our eyes in a matter of years.” Moreover, the deepening of trade and investment ties between countries was facilitated by coordinated steps to transfer payments into national currencies. Currently, the share of the ruble and yuan in Russian-Chinese commercial transactions exceeds 90%, which is an unprecedented result in such a short time. An intermediate solution to the existing problem could potentially be the creation of a separate bank that deals exclusively with payments from the two countries. On the basis of such an institute, all current problems of payment transactions could be worked out, Novikova is sure.
«The easiest way is to create a separate direction or payment system that will allow you to conclude transactions, — The founder of the Academy of Business and Strategic Marketing continues the conversation. Julia Korchagina-Ozcan. — Now participants in bilateral trade work through individual banks, cryptocurrencies or small intermediaries.
However, the last word in resolving the issue of payments between Russia and China will remain with politicians. As Alexander Razuvaev, a member of the supervisory board of the Guild of Financial Analysts and Risk Managers, pointed out, the Russian economy is not that large; for China, trade turnover with European and American partners is more important. That is why China is very happy to buy oil, gas and even ice cream from Russia, but is in no hurry to invest in shares of domestic companies. By withdrawing money from American Treasuries (these are debt securities issued by the US Treasury, they are secured by obligations of the American government and have long been considered a very reliable investment by investors – editor's note), investors from the Middle Kingdom are buying gold with them.
Regional banks that are not involved in trade with the West could be a good solution for processing payments between Russia and China. It would be even better if our country starts using the digital ruble. The second largest state bank of our country is a pioneer here. “I think that this story will be focused on trade with China,” — the expert explained. You can use the countries of Central Asia and the former Soviet republics as intermediaries. Nowadays, the topic of Islamic finance is gaining increasing popularity all over the world and in Russia: it can also be used to improve trade relations between the two countries.
«It is clear that trade between Russia and China will not stop in any case: we are too we need each other, so politicians will definitely come up with something,” — confident expert. Digitalization is now developing very quickly, so here you can find a new tool that has not been used by anyone before, and also carry out calculations through it. Maybe they will create some kind of innovative financial institution that will unite all the rogue countries — Iran, Russia, North Korea and Belarus — and will make payments through it. But the last word on how international trade issues will be resolved will remain with politicians, the analyst emphasized.