Amid Western sanctions imposed on Russia due to its aggression in Ukraine, four of China’s largest banks have significantly increased their lending to Russian banks. Western financial institutions withdrew their operations from Russia in response to Russia’s invasion of Ukraine, while China has actively promoted the yuan as an alternative global currency.
An analysis by the Kyiv School of Economics, based on the latest official data, reveals that China’s engagement with the Russian banking sector has quadrupled over the 14-month period ending in March this year.
The report highlights that these Chinese banks have stepped in to fill the void left by Western banks, which faced pressure from domestic regulators and politicians to discontinue their business ties with Russia. Simultaneously, the growing international consensus to boycott Russia has added complexity to conducting business in the country.
The Russian Central Bank disclosed that the combined involvement of China’s Industrial and Commercial Bank of China (ICBC), Bank of China, China Construction Bank, and the Agricultural Bank of China surged from $2.2 billion to $9.7 billion during the 14-month period ending in March. Notably, ICBC and Bank of China were responsible for $8.8 billion of this total.
In contrast, Austria’s Raiffeisen Bank, a prominent foreign bank with significant ties to Russia, increased its assets in Russia by more than 40%, rising from $20.5 billion to $29.2 billion during the same period. However, Raiffeisen Bank has indicated its consideration of reducing its assets in Russia and has already decreased them to $25.5 billion since March.
This move by Chinese banks aligns with Russia’s ongoing efforts to transition to the yuan as an international reserve currency, thereby reducing its reliance on the US dollar and euro. The growing collaboration between China and Russia in the financial sector underscores their commitment to bolstering economic ties and diversifying currency options in the face of international sanctions.