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Straits Times
22-04-2025
- Business
- Straits Times
‘China Track' bank netting system shields Russia-China trade from Western eyes
Chinese banks had become too cautious about doing business with Russia and jeopardising their ties with the US. PHOTO: REUTERS MOSCOW – Major Russian banks have set up a netting payments system dubbed 'The China Track' for transactions with China, aiming to reduce their visibility to Western regulators and mitigate the risk of secondary sanctions, banking sources told Reuters. Russia's trade with China hit a record US$245 billion (S$320 billion) in 2024, despite payment problems and commissions running as high as 12 per cent, as Chinese banks had grown too cautious to do business with Russia and jeopardise their ties with the US. The issue had become so important that Russian President Vladimir Putin and China's President Xi Jinping discussed it during the Russian leader's visit to China in May 2024, which was aimed at cementing the two countries' 'no limits' partnership. Mr Xi is set to take part in Russia's Victory Day parade on May 9, but his visit is now taking place amid China's trade war with the US, making the booming trade with Russia and other non-Western nations more important. 'I do not rule out that the Chinese partners will no longer be afraid of secondary sanctions,' said Mr Alexander Shokhin, the head of the powerful RSPP business lobby group, who takes part in trade negotiations with China. The new system has been set up by major sanctioned banks and involves a web of intermediaries registered in countries that Russia considers friendly. The system has been in place for some time and has not yet suffered any major setbacks. Each bank runs several verified payments agents, some of whom handle payments for exports, and some for imports. All payments are then netted centrally at the bank with all the counterparties involved receiving their money. The banks settle trade in both directions, said market sources, who spoke on condition of anonymity due to the sensitivity of the issue. Secure from being blocked The banks provide guarantees for payments' settlement as well as financial instruments insuring against a possible default of a payment agent or a counterparty. The system does not use the Swift messaging system or accounts in Western banks. 'We had to structure financial flows through friendly jurisdictions to secure these payments from being blocked,' one market source said, stressing that netting has become the cheapest way for settling trade with China. The sources declined to name the banks, saying they do not want to draw additional attention to their operations because of sanctions but stressed that all the banks involved rank among Russia's top 20. China propped up Russia economically in 2022 when the country was faced with unprecedented Western sanctions over its war in Ukraine, providing consumer goods which replaced those offered by Western companies. China also continued to import oil and other natural resources from Russia despite Western pressure. However, even despite the goodwill, consumer goods trade nearly halted in 2024 due to the secondary sanctions risk. Some bankers say that the netting system allows payments to be made directly to any Chinese bank without delay, provided that the goods are not under sanctions and the counterparty is registered in one of the selected 11 provinces of China. Speaking in Parliament in April, Russia's central bank governor Elvira Nabiullina acknowledged that Western sanctions complicated cross-border payments for Russian companies, but said that alternative payment channels are being developed. No spread on top The netting scheme is mainly designed for large corporations. The sources said it has some disadvantages, including the requirement to authorise every single payment and problems with value-added tax refunds. 'The scheme allows direct work with 11 Chinese provinces, which produce most of the goods that are being exported to Russia. The cost is calculated based on the official exchange rate, with no spread on top,' one banker said. The minimum cost of the China Track service, including commissions and exchange rate differences, is about 1 per cent for imports and 0.5 per cent for exports, compared with 2 per cent to 4 per cent outside the system and up to 12 per cent at the height of the problem in 2024. 'Today, 100 per cent of all the money is being transferred without a glitch, we have not had a single case where the money comes back. The money is normally delivered within two days,' said another banker involved in the system's operations. The banker added that currently, there is only one clearing session a week each Thursday, but the plan is to hold two sessions from the end of April, possibly extending the number of trading sessions further as demand remains strong. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
22-04-2025
- Business
- Straits Times
'China Track' bank netting system shields Russia-China trade from Western eyes
Russian Foreign Minister Sergei Lavrov and Chinese Foreign Minister Wang Yi attend a signing ceremony following their talks in Moscow, Russia, April 1, 2025. Pavel Bednyakov/Pool via REUTERS FILE PHOTO: A woman walks along a bridge, with the Moscow City business centre and the Kremlin wall seen in the background, on a sunny day in Moscow, Russia, February 24, 2025. REUTERS/Evgenia Novozhenina//File Photo MOSCOW - Major Russian banks have set up a netting payments system dubbed "The China Track" for transactions with China, aiming to reduce their visibility to Western regulators and mitigate the risk of secondary sanctions, banking sources told Reuters. Russia's trade with China hit a record $245 billion last year despite payment problems and commissions running as high as 12%, as Chinese banks had grown too cautious to do business with Russia and jeopardise their ties with the United States. The issue had become so important that Russian President Vladimir Putin and China's President Xi Jinping discussed it during Putin's visit to China in May 2024, which was aimed at cementing the two countries' 'no limits' partnership. Xi is set to take part in Russia's Victory Day parade on May 9, but his visit is now taking place amid China's trade war with the United States, making the booming trade with Russia and other non-Western nations more important. "I do not rule out that the Chinese partners will no longer be afraid of secondary sanctions," said Alexander Shokhin, the head of the powerful RSPP business lobby group, who takes part in trade negotiations with China. The new system has been set up by major sanctioned banks and involves a web of intermediaries registered in countries that Russia considers friendly. The system has been in place for some time and has not yet suffered any major setbacks. Each bank runs several verified payments agents, some of whom handle payments for exports, and some for imports. All payments are then netted centrally at the bank with all the counterparties involved receiving their money. The banks settle trade in both directions, said market sources, who spoke on condition of anonymity due to the sensitivity of the issue. SECURE FROM BEING BLOCKED The banks provide guarantees for payments' settlement as well as financial instruments insuring against a possible default of a payment agent or a counterparty. The system does not use the SWIFT messaging system or accounts in Western banks. "We had to structure financial flows through friendly jurisdictions to secure these payments from being blocked," one market source said, stressing that netting has become the cheapest way for settling trade with China. The sources declined to name the banks, saying they do not want to draw additional attention to their operations because of sanctions but stressed that all the banks involved rank among Russia's top 20. China propped up Russia economically in 2022 when the country was faced with unprecedented Western sanctions over its military action in Ukraine, providing consumer goods which replaced those offered by Western companies. China also continued to import oil and other natural resources from Russia despite Western pressure. However, even despite the goodwill, consumer goods trade nearly halted last year due to the secondary sanctions risk. Some bankers say that the netting system allows payments to be made directly to any Chinese bank without delay, provided that the goods are not under sanctions and the counterparty is registered in one of the selected 11 provinces of China. Speaking in parliament in April, Russia's central bank Governor Elvira Nabiullina acknowledged that Western sanctions complicated cross-border payments for Russian companies, but said that alternative payments channels are being developed. NO SPREAD ON TOP The netting scheme is mainly designed for large corporations. The sources said it has some disadvantages, including the requirement to authorise every single payment and problems with value-added tax (VAT) refunds. "The scheme allows direct work with 11 Chinese provinces, which produce most of the goods that are being exported to Russia. The cost is calculated based on the official exchange rate, with no spread on top," one banker said. The minimum cost of the "China Track" service, including commissions and exchange rate differences, is about 1% for imports and 0.5% for exports, compared with 2-4% outside the system and up to 12% at the height of the problem last year. "Today 100% of all the money is being transferred without a glitch, we have not had a single case where the money comes back. The money is normally delivered within two days," said another banker involved in the system's operations. The banker added that currently there is only one clearing session a week each Thursday, but the plan is to hold two sessions from the end of April, possibly extending the number of trading sessions further as demand remains strong. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
Yahoo
22-04-2025
- Business
- Yahoo
Exclusive-'China Track' bank netting system shields Russia-China trade from Western eyes
MOSCOW (Reuters) -Major Russian banks have set up a netting payments system dubbed "The China Track" for transactions with China, aiming to reduce their visibility to Western regulators and mitigate the risk of secondary sanctions, banking sources told Reuters. Russia's trade with China hit a record $245 billion last year despite payment problems and commissions running as high as 12%, as Chinese banks had grown too cautious to do business with Russia and jeopardise their ties with the United States. The issue had become so important that Russian President Vladimir Putin and China's President Xi Jinping discussed it during Putin's visit to China in May 2024, which was aimed at cementing the two countries' 'no limits' partnership. Xi is set to take part in Russia's Victory Day parade on May 9, but his visit is now taking place amid China's trade war with the United States, making the booming trade with Russia and other non-Western nations more important. "I do not rule out that the Chinese partners will no longer be afraid of secondary sanctions," said Alexander Shokhin, the head of the powerful RSPP business lobby group, who takes part in trade negotiations with China. The new system has been set up by major sanctioned banks and involves a web of intermediaries registered in countries that Russia considers friendly. The system has been in place for some time and has not yet suffered any major setbacks. Each bank runs several verified payments agents, some of whom handle payments for exports, and some for imports. All payments are then netted centrally at the bank with all the counterparties involved receiving their money. The banks settle trade in both directions, said market sources, who spoke on condition of anonymity due to the sensitivity of the issue. SECURE FROM BEING BLOCKED The banks provide guarantees for payments' settlement as well as financial instruments insuring against a possible default of a payment agent or a counterparty. The system does not use the SWIFT messaging system or accounts in Western banks. "We had to structure financial flows through friendly jurisdictions to secure these payments from being blocked," one market source said, stressing that netting has become the cheapest way for settling trade with China. The sources declined to name the banks, saying they do not want to draw additional attention to their operations because of sanctions but stressed that all the banks involved rank among Russia's top 20. China propped up Russia economically in 2022 when the country was faced with unprecedented Western sanctions over its military action in Ukraine, providing consumer goods which replaced those offered by Western companies. China also continued to import oil and other natural resources from Russia despite Western pressure. However, even despite the goodwill, consumer goods trade nearly halted last year due to the secondary sanctions risk. Some bankers say that the netting system allows payments to be made directly to any Chinese bank without delay, provided that the goods are not under sanctions and the counterparty is registered in one of the selected 11 provinces of China. Speaking in parliament in April, Russia's central bank Governor Elvira Nabiullina acknowledged that Western sanctions complicated cross-border payments for Russian companies, but said that alternative payments channels are being developed. NO SPREAD ON TOP The netting scheme is mainly designed for large corporations. The sources said it has some disadvantages, including the requirement to authorise every single payment and problems with value-added tax (VAT) refunds. "The scheme allows direct work with 11 Chinese provinces, which produce most of the goods that are being exported to Russia. The cost is calculated based on the official exchange rate, with no spread on top," one banker said. The minimum cost of the "China Track" service, including commissions and exchange rate differences, is about 1% for imports and 0.5% for exports, compared with 2-4% outside the system and up to 12% at the height of the problem last year. "Today 100% of all the money is being transferred without a glitch, we have not had a single case where the money comes back. The money is normally delivered within two days," said another banker involved in the system's operations. The banker added that currently there is only one clearing session a week each Thursday, but the plan is to hold two sessions from the end of April, possibly extending the number of trading sessions further as demand remains strong. Sign in to access your portfolio
Reuters
22-04-2025
- Business
- Reuters
Exclusive: 'China Track' bank netting system shields Russia-China trade from Western eyes
Summary Major Russian banks set up netting system for China trade Aim is to cut risk of secondary sanctions System has lower commissions, is set to expand Xi due to visit Russia in May, meet Putin MOSCOW, April 22 (Reuters) - Major Russian banks have set up a netting payments system dubbed "The China Track" for transactions with China, aiming to reduce their visibility to Western regulators and mitigate the risk of secondary sanctions, banking sources told Reuters. Russia's trade with China hit a record $245 billion last year despite payment problems and commissions running as high as 12%, as Chinese banks had grown too cautious to do business with Russia and jeopardise their ties with the United States. The issue had become so important that Russian President Vladimir Putin and China's President Xi Jinping discussed it during Putin's visit to China in May 2024, which was aimed at cementing the two countries' 'no limits' partnership. Xi is set to take part in Russia's Victory Day parade on May 9, but his visit is now taking place amid China's trade war with the United States, making the booming trade with Russia and other non-Western nations more important. "I do not rule out that the Chinese partners will no longer be afraid of secondary sanctions," said Alexander Shokhin, the head of the powerful RSPP business lobby group, who takes part in trade negotiations with China. The new system has been set up by major sanctioned banks and involves a web of intermediaries registered in countries that Russia considers friendly. The system has been in place for some time and has not yet suffered any major setbacks. Each bank runs several verified payments agents, some of whom handle payments for exports, and some for imports. All payments are then netted centrally at the bank with all the counterparties involved receiving their money. The banks settle trade in both directions, said market sources, who spoke on condition of anonymity due to the sensitivity of the issue. SECURE FROM BEING BLOCKED The banks provide guarantees for payments' settlement as well as financial instruments insuring against a possible default of a payment agent or a counterparty. The system does not use the SWIFT messaging system or accounts in Western banks. "We had to structure financial flows through friendly jurisdictions to secure these payments from being blocked," one market source said, stressing that netting has become the cheapest way for settling trade with China. The sources declined to name the banks, saying they do not want to draw additional attention to their operations because of sanctions but stressed that all the banks involved rank among Russia's top 20. China propped up Russia economically in 2022 when the country was faced with unprecedented Western sanctions over its military action in Ukraine, providing consumer goods which replaced those offered by Western companies. China also continued to import oil and other natural resources from Russia despite Western pressure. However, even despite the goodwill, consumer goods trade nearly halted last year due to the secondary sanctions risk. Some bankers say that the netting system allows payments to be made directly to any Chinese bank without delay, provided that the goods are not under sanctions and the counterparty is registered in one of the selected 11 provinces of China. Speaking in parliament in April, Russia's central bank Governor Elvira Nabiullina acknowledged that Western sanctions complicated cross-border payments for Russian companies, but said that alternative payments channels are being developed. NO SPREAD ON TOP The netting scheme is mainly designed for large corporations. The sources said it has some disadvantages, including the requirement to authorise every single payment and problems with value-added tax (VAT) refunds. "The scheme allows direct work with 11 Chinese provinces, which produce most of the goods that are being exported to Russia. The cost is calculated based on the official exchange rate, with no spread on top," one banker said. The minimum cost of the "China Track" service, including commissions and exchange rate differences, is about 1% for imports and 0.5% for exports, compared with 2-4% outside the system and up to 12% at the height of the problem last year. "Today 100% of all the money is being transferred without a glitch, we have not had a single case where the money comes back. The money is normally delivered within two days," said another banker involved in the system's operations. The banker added that currently there is only one clearing session a week each Thursday, but the plan is to hold two sessions from the end of April, possibly extending the number of trading sessions further as demand remains strong.
Russia Today
18-03-2025
- Politics
- Russia Today
Putin to hold phone call with Trump
Russian President Vladimir Putin is due to speak on the phone with his US counterpart, Donald Trump, later today. The Ukraine conflict and a possible ceasefire are expected to be discussed. Ahead of the crucial call, Putin spoke with members of the Russian Union of Industrialists and Entrepreneurs (RSPP) on the country's successful resistance to Western sanctions.
