Russia faces major trade disruption as Chinese banks reject Yuan payments
Russian importers are grappling with a new significant issue in their transactions with China. Payments in yuan bought in Russia are increasingly being rejected, causing alarm among market participants, reports The Moscow Times. Both Chinese banks and payment agents handling transfers to the East via third countries are wary of dealing with such funds, sources say.
Market insiders revealed that new terminologies— "clean" and "dirty" yuan—have emerged in the cross-border payments sector since June. A "clean" yuan refers to the currency purchased abroad, whereas a "dirty" yuan is bought within Russia, whether on the stock exchange or the interbank market. Handling this "dirty" yuan has become burdensome.
The number of Chinese banks willing to accept money from Russia significantly dwindled after the US imposed sanctions on the Moscow Exchange and Asian subsidiaries of major banks on 12 June. VTB Shanghai, which is also under sanctions, began facing severe issues in transferring yuan to client accounts in China.
Even before, acquiring yuan within Russia was arduous due to the threat of secondary US sanctions. The bank used complex methods to replenish its yuan reserves, either through the Moscow Exchange and subsequent transfer to China via local intermediary banks or the Russian division of the Bank of China, receiving yuan from the same intermediaries. But now, this channel has shut down as both intermediaries and the Bank of China have withdrawn from the scheme.
Simultaneously, operations involving "counterflows"—using incoming yuan on exporter accounts to pay for goods or swapping debt obligations to settle similar transactions—are becoming increasingly complex. The source noted that exports passing through VTB Shanghai are less than the payments for imports, aggravating the situation.
Consequently, direct transfers of yuan from Russia to China, which were challenging before, have now nearly ceased entirely. "If before 12 June, around 15% of such payments were quickly and seamlessly received by Chinese counterparts, now it's approximately 5%," a source told The Moscow Times.
The situation is further complicated by new issues with the only effective scheme for settling foreign trade transactions through payment agents in other jurisdictions. "In the past month, three out of five of our payment agents informed us they would only work with 'clean' yuan," disclosed an equipment supplier from China.
Regarding attempts to pay directly to China in rubles, not all banks are willing to accept payments in the Russian currency. Those that do often impose exorbitant conversion rates to "clean" yuan, according to the source. Even if rubles reach China, utilizing them is challenging due to low demand. "It is even harder to find suppliers willing to accept rubles, and they tend to raise prices for such payments. Therefore, it still turns out to be neither quick nor cheap," added the source.