FT: China has sharply increased its influence on Russian banks

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Chinese banks became the main creditors of the Russian banking system after the introduction of Western sanctions in response to the Russian invasion of Ukraine. Over the course of a year and a half of war , China's influence on Russian banks has quadrupled, the Financial Times reported on Monday, September 4, citing the Kiev School of Economics, which analyzed data from the Bank of Russia.

According to these data, during the first 14 months of the war, the Industrial and Commercial Bank of China, the Bank of China, the Construction Bank of China and the Agricultural Bank of China increased investments in the Russian Federation in yuan from 2.1 billion to 9.7 billion dollars.

The share of the yuan in Russian export payments increased to 16 percent

Over the same period, the share of so-called “toxic currencies,” primarily the dollar and euro, in export calculations fell to less than 50 percent, while the yuan’s share rose to 16 percent. Before the start of the war, the dollar and euro accounted for more than 60 percent of export payments, and the yuan's share was less than one percent.

“Loans from Chinese banks to Russian financial and credit organizations, which for the most part replace dollars and euros with yuan, show that sanctions are doing their job,” Andrey Onoprienko, deputy director for development at the Kiev School of Economics, told the publication.

At the same time, the July report of the Bank of Russia also talks about the replacement of the dollar with the yuan in other areas of finance, in particular in the turnover of the exchange foreign exchange market, where over the course of a year and a half of the war, the share of the Chinese currency reached 44 percent in June of this year from almost zero. In turn, The Moscow Times newspaper cites data from TrueEcon analysts, according to which in Russian banks the share of deposits of Russian companies in yuan increased to 42.8 percent, and among individuals - to 14.4 percent.

Raiffeisen Bank's assets in the Russian Federation are three times higher than the investments of all Chinese banks

At the same time, as the Financial Times notes, Chinese banks are still far from matching Austria's Raiffeisen Bank, the largest Western bank still operating in Russia. Over the course of a year and a half of war, this bank increased its assets in the Russian Federation by more than 40 percent - from 20.5 billion to 29.2 billion dollars, and at the end of February 2023, according to one of its senior representatives, handled 40-50 percent of all money flows between Russia and the rest of the world. Profit at Raiffeisen Bank's Russian business rose 9.6% to 867 million euros in the first six months of this year.

In 2022, Russian authorities made it much more difficult for foreign banks to sell their subsidiaries in the country. The ECB is increasing pressure on European banks to force them to leave Russia. According to the publication, Raiffeisen Bank said it was trying to find ways to sell or spin off its Russian business while complying with local and international laws.

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