Russian Prime Minister Mikhail Mishustin and Chinese State Council Head Li Qiang agreed to ensure the smooth functioning of settlement channels in trade between the two countries and open new bank branches. What does this mean for Russian business?
The ruble strengthened sharply against the yuan after the release of a joint communique following the meeting of the heads of government of Russia and China in Moscow. The yuan fell to a value below 12 rubles.
Premier Mikhail Mishustin and Head of the State Council of China Li Qiang agreed to ensure the smooth functioning of settlement channels in trade between the two countries and open new branches of banks.
Alexey Maslov, Director of the Institute of Asian and African Countries at Moscow State University, comments:
Alexey Maslov, Director of the Institute of Asian and African Countries at Moscow State University, Orientalist, “In fact, this is what Russian banks have been trying to achieve in recent years, this is the opening of branches of Russian banks in China and an expanded number of correspondent accounts. Formally, this is not prohibited, and Chinese law allows opening such institutions, but, for example, many attempts by leading Russian banks to submit applications even after negotiations with the Chinese regulator ended in nothing. To be honest, a lot of Russian banks were simply torpedoed in the Chinese market, to put it mildly, especially in the last year, and when uploading documents to a special online system, they did not receive any response. And many people have the impression that China deliberately does not want to work with Russian banks in the field of opening branches. There is some subtlety here, because when we talk about branches of Russian banks in China, we must understand that, roughly speaking, this is an internal name, while in reality a Chinese legal entity should open and work within the framework of the Chinese tax system. And today we have only, in fact, one such bank — VTB Shanghai, while, for example, opportunities to expand its activities to Beijing and other cities, that is, to open more divisions, have not yet been crowned with success. Theoretically, all this should completely eliminate all problems in the financial banking market. But we need to make a few reservations. Firstly, there are no deadlines set anywhere for when and how this can be done. And, in general, this has been discussed many times, and I remember that the first discussion about expanded access of Russian and Chinese banks to each other’s markets was at least ten years ago, but since then we have had the same problems. And, secondly, correspondent accounts are not formally prohibited to open. That is, what is emphasized in the joint communique, in reality, is also in Chinese legislation, it is just a statement of what is allowed to be done in China. But we see that there are no serious developments so far. If you do not need to read between the lines, that is, China will now open similar divisions or similar correspondent accounts, then we will assume that the entire banking and financial crisis in the Russian market has been overcome.”
Vasily Kashin, Director of the Center for Integrated European and International Studies at the Higher School of Economics, comments:
Vasily Kashin, Director of the HSE Center for Integrated European and International Studies, “Business continues to suffer, there are serious delays in payments. This affects not only those who import some goods that can be classified as dual-use goods, but also those who import completely ordinary consumer goods. Therefore, all methods will be used to circumvent this problem, this is the most acute problem of Russian-Chinese relations at the moment — financial calculations. Apparently, it will take another months to fully overcome the consequences of the escalation of sanctions, which was launched at the beginning of the year. But there is hope that additional channels for making calculations will arise, delays will decrease. The Americans will counteract this by imposing new sanctions. But still, if there are branches of banks of the two countries operating in national currencies, and taking into account other planned measures, probably by next year we will have a system that will be protected, which the Americans will not be able to influence.”
This is a statement of intent that can simplify the opening of a branch of a Russian bank in China, since it is approved by the country’s leadership, but it will not help settlements in hard currencies, says Oleg Vyugin, former deputy chairman of the Central Bank, professor at the HSE, chairman of the Board of Directors of NAUFOR:
Oleg Vyugin, Chairman of the Board of Directors of NAUFOR, “There are no problems opening branches of Russian banks in China, and Chinese banks in Russia, but provided that banks operate in rubles and yuan, then no sanctions apply, you can work. If it is a desire to work in hard currencies of unfriendly countries, then this is a useless activity, it will not lead to a breakthrough in calculations. Most likely, what is said that Russia and China will do this, will facilitate the opening of branches, is just a statement that we are working and will strengthen cooperation in the banking sector. And this may result in the fact that some other Russian banks will also open branches in China, and we know such banks, they intend to do this. But this will not help much in the situation if you need to make payments in hard currencies of unfriendly countries. A branch is simply the easiest way, and if you open a full-fledged subsidiary bank, then there are much more regulatory requirements, and it is more expensive, but for just such calculations, a branch is enough. These are intentions, but it can be regarded as a nod, if some Russian bank tries to open a branch, it can refer to this, perhaps it will be met more or less constructively by China. Only high-level political statements indicate that, in principle, there is a certain green light, there will be no need to fight through political problems. And for the Chinese, as I understand it, the approval of the country’s leadership is important.”
On September 1 of this year, a law comes into force allowing foreign banks from friendly countries to open branches in Russia. It was this mechanism that was meant, according to financial market expert Andrey Barkhota:
Andrey Barkhota, financial market expert “There will be a new norm for the functioning of branches of foreign banks in Russia in terms of the fact that there are not only first-tier banks such as Bank of China and others, but there are banks of the second and third echelons in China, which can base the business model on the functioning of payments from Russia, if At the same time, they will continue to be second- and third-tier banks. Perhaps, on the basis of such a model, a new payment circuit from Russia to China and vice versa will be formed. This will be implemented instantly, because virtually every week we have already begun to receive ambiguous news that payments and transfers between the Russian Federation and the People’s Republic of China have been suspended, frozen, and already cleared goods from China are subject to refund. These problems began to arise more and more often, and they have reached not just the industrial, but the state level, so this will be solved as quickly as possible, because without bilateral trade, in fact, the losses incurred by economic agents are quite large. Most likely, we will already see the first new payment and transfer schemes within the framework of bilateral relations by mid-September, and the decision and implementation are unlikely to be postponed. Calculations should also resume, while due to the fact that earlier calculations for all nomenclatures of goods and services were carried out through the same channels, perhaps the solution to the problem lies in the plane of separation of these channels, for example, for Russian raw materials exports there will be one channel of payments and settlements, for Chinese imports of various kinds of products there will be there is another payment channel, but at the same time the interests of the two sides must be respected: for Russia, the continuity of settlements is critically important, for the Chinese side, minimizing the risks from secondary sanctions and some understanding of the stability of the yuan-ruble exchange rate is important.”
Earlier it was reported that Chinese Premier Li Qiang arrived in Moscow. The visit took place against the background of ongoing problems with settlements between the countries.
Currently, there are several parties in the Russian-Chinese market that have their own interests. On the one hand, these are Chinese exporters with large volumes of goods for the Russian market, who need stability in calculations and the exchange rate in the ruble — yuan pair. On the other hand, these are Chinese banks that are afraid of sanctions, and on the third hand, the daughters of Chinese banks in Russia, whose total assets amount to almost a trillion rubles, but settlements in them are also stagnating.
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