China-Russia Trade Faces Hurdles As Global Banks Return 80% Of Yuan Transfers, Delaying Payments By 6 Months Amid US Sanctions

The trade relationship between Xi Jinping’s China and Vladimir Putin’s Russia is under strain, with payments being delayed for up to six months and a high percentage of bank transfers being returned.

What Happened: Nearly 80% of bank transfers made in Chinese yuan are being returned without explanation, after being held up for weeks, Business Insider reported on Thursday. The original report by Kommersant indicates that these returns could result in exchange rate or commission losses for Russian businesses.

The complications started in December when the U.S. implemented secondary sanctions aimed at financial institutions assisting Russia in evading sanctions. This led to global banks, from China to the U.A.E., Turkey, and Austria, cutting back transactions with Russia to avoid potential consequences.

The situation worsened when the U.S. Treasury introduced a new set of extensive U.S. sanctions against Russia, causing the Moscow Exchange to suspend dollar and euro trade.

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Why It Matters: The ongoing trade issues arise amid escalating pressure on external entities dealing with Russian companies that have managed to sustain their international business operations despite widespread sanctions. The U.S. and its allies are penalizing those who engage with Russia, following Russia’s full-scale invasion of Ukraine 29 months ago.

Despite these hurdles, trade between Russia and China hit a record $240 billion last year. The two nations, although not official allies, have been growing closer in recent years. This relationship has been nurtured despite the ongoing Ukraine crisis and the potential sanctions on Beijing banks for their alleged support of Russia’s war in Ukraine.

Chinese President Xi Jinping has also urged global powers to facilitate dialogue between Russia and Ukraine, a move seen as a direct challenge to the U.S.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari