Russian Firms Rush To Chinese Banks To Open Accounts
Russian firms are heading to Chinese banks in Moscow to open new accounts. With international sanctions limiting their opportunities, Russian companies are now seeking to do business with Chinese firms.
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200-300 Russian Firms Inquiring About Opening Chinese Bank Accounts
A person familiar with the matter disclosed the deluge of Russian firms. The source, who insisted on anonymity, said that around 200 to 300 companies approached the bank he works in.
They all wanted to open new accounts. The source works for a Moscow branch of a Chinese state bank and has direct knowledge of the operation.
He said that he expects yuan transactions by such firms to increase. Among the active state banks in Moscow are the Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank.
The move by Russian firms is a direct result of Western governments cutting off Russia from the world’s financial system. Many multinational companies stopped doing business in the country and dumped their investments.
However, governments froze Russian accounts in their countries and seized the assets of many wealthy Russian individuals.
China Opposes Russia Economic Sanctions
Meanwhile, China became a lone voice in the global wilderness. The country repeatedly opposed sanctions for Russia. It is said that sanctions remain ineffective. As a result, China said it will maintain normal economic and trade ties with Russia.
An anonymous Chinese businessman with long-term ties with Russia said that local firms plan to open yuan accounts.
He said that it’s simple logic. “If you cannot use US dollars or euros… you have no other options but turn to China,” he observed. He added that the trend is now inevitable.
China’s Yuan Could Chip Away US Dollar’s Dominance
For China, the move also means that its currency can reduce the dominance of the US dollar in global trade.
The willingness of emerging-market giants such as China to continue dealing with Russia also goes against the Western embargo. Now, Moscow will have an avenue to continue doing business and getting paid.
For example, FESCO Transportation Group, a major Russian transport, and logistics company announced it will accept Chinese yuan as payment.
This circumvents the current lockout of Russian banks from the SWIFT banking system. “It's natural for Russian companies to be willing to accept yuan,” said Shen Muhui.
Muhui heads a group that promotes trade links between Russia and China. However, small Chinese exporters are struggling with the ruble’s ongoing devaluation.
As a result, many are suspending deliveries to prevent losses. The ruble is now trading at 17 to the yuan. It lost more than 40% of its value over the past week.
Russia-China Trade Will Grow In the Long Term
Meanwhile, Konstantin Popov, a Russian entrepreneur in Shanghai, said that while expensive, Russian firms have no choice. “Companies will be switching to yuan-rouble business,” he said.
It won’t be advantageous for Russian firms as “things will become two, three or four times more expensive.”
However, Shen thinks it’s the only way for Russia at the moment. Consequently, Russian demand for Chinese goods will increase in the long term. “The key is to solve trade settlement issues” in the face of sanctions, he noted.
Watch the DW News video reporting on Isolated Russia – will China step in?
What do you think of Russian firms’ moves to open Chinese bank accounts? Does this circumvent Western efforts to choke off Russia from the global financial system? Also, will this move benefit Russia or China more?
Tell us what you think. Share your comments below.