Experts estimate the increase in payment terms to China

The period for making payments from RUSSIA to CHINA has increased to two to three months, Chinese consultants reported at SPIEF. On average, calculations are completed in one to three weeks, the data was provided to the REC. Fraudsters also influence payment problems

The period for money transfers made by businesses from Russia to China has begun to reach two to three months. Yuan Yi, senior partner of the Moscow office of the law firm DHH, spoke about this at a session on the interaction of small and medium-sized businesses of the two countries within the framework of the St. Petersburg International Economic Forum.

According to Yuan Yi, previously it took a short time for money transfers, but now the receipt of money in the account of a Chinese company after sending it from Russia can wait two to three months or may not be received at all. This leads to uncertainty regarding the fulfillment of the terms of trade contracts, because if transfers are delayed or canceled, it is not clear whether the partner should be considered to have violated the terms of the contract.

DIRECTOR for Foreign Network Development of the Russian EXPORT Center (REC), Dmitry Prokhorenko, explained to RBC on the sidelines of SPIEF that, on average, payments to China are now processed in one to three weeks. “It’s a little longer than it was. It all depends on the types of products (sanctioned or non-sanctioned. -), on correspondent banks, on the currency of settlements,” Prokhorenko explained. He added that one of the exporters recently made a payment in three days, which is a record time.

Speaking at the same session, Vasily Kuzovkov , director of AVASOFT Systems and IC Energosoft, added that now “not a single supplier could specifically answer the question of how to pay between Russia and China.” As an example of the negative consequences for business due to the complexity of translations, he cited the situation with purchased equipment that stood at the plant for at least three months because the supplier could not ship it to a buyer from Russia, who could not pay for it.

Problems with payments are also influenced by the actions of attackers, Yuan pointed out. She said that scammers can send letters to Russian businesses from supposedly Chinese partners from an email that differs by only one letter from the original one. In the letter “from a Chinese company,” the scammers report that they have changed their bank details and now the funds should be transferred to a new account, after which the money goes to the criminals. According to Yuan, there is now a dispute over one such case, where a Russian company apparently sent money to scammers, after a while the Chinese partner reported that it had not received the payment and therefore could not send the goods.

Problems with payments between Russia and other countries have been observed since 2022, after the introduction of Western sanctions against the Russian financial system. In December 2023, US President Joe Biden signed a decree according to which the US Treasury Department had the authority to impose sanctions against foreign banks working with sanctioned persons from Russia or facilitating the supply of certain materials and equipment to the Russian military-industrial complex (DIC). In February 2024 , Chinese Ambassador to Russia Zhang Hanhui explained the disruptions in settlements between the two countries by saying that third countries were creating problems for China.

For example, since the beginning of 2024, the media have written several times that some large banks in China have stopped accepting payments from Russia, including ICBC, China Construction Bank, China Citic Bank, Industrial Bank, etc. Also, Chinese banks have increased the timing of transfers due to enhanced verification or have even begun to refuse services to Russian businesses. Because of this, companies were forced to turn to the only Russian bank that has a branch in China, VTB, which led to a delay in payments of up to six months, REUTERS reported .

In April 2024, the HEAD of VTB, Andrei Kostin, noted that the Chinese subsidiary, VTB Shanghai, operates in a completely closed circuit and is “able to take on the functions of the main settlement bank in yuan to service Russian-Chinese bilateral trade.” According to him, in a situation where it is impossible for foreign counterparties and their banks to carry out direct payments and establish direct commodity chains with Russia, the range of solutions that work right now is small. “This is either the development of our own payment infrastructure in third countries, or the use of affiliated banks and various kinds of agency schemes,” said Kostin.

How Russia trades with China

Trade turnover between Russia and China at the end of 2023 increased by 26.3% compared to 2022 and amounted to a record $240.11 billion. Exports from China to Russia increased by 46.9%, to $110.97 billion, from Russia to China - by 12.7%, to $129.13 billion. China purchases mainly energy resources from Russia (oil , natural gas and coal), copper, timber and seafood. Cars, smartphones, computers, industrial and specialized equipment, etc. are supplied to Russia from China. According to the latest data from the General Administration of Customs of the People's Republic of China, in January-April 2024, trade turnover between China and Russia increased by 4.7% compared to the same period of the previous year. - up to $76.58 billion.

However, in March 2024, due to the threat of secondary sanctions, Chinese companies for the first time since December 2022 reduced direct supplies of machinery, mechanisms and equipment, including electrical equipment, to Russia; overall, Chinese exports fell by 14% (in dollars) over the month. In April, the trend continued; according to Chinese customs, the import of goods into Russia decreased by 10.2% compared to the same month last year (in yuan terms, and by 13% in DOLLAR terms). Experts said that in addition to the threat of secondary sanctions, the decline in imports could be influenced by the weakening of the ruble in annual terms.

At SPIEF, Director of the Institute of Asian and African Countries at Moscow State University Alexey Maslov spoke about the peculiarities of doing business in China, which Russian companies do not always take into account. First visits to China are necessary only in order to make good friends, says Maslov: “The vast majority of cases of failure of our business in China, especially small and medium-sized businesses, are always associated with the fact that real working conditions are not taken into account. The first thing you need to stock up on to work in China is a lot of time. Nothing will be achieved in six months or a year. It will always seem to you that the deal is close, you have agreed on everything, you have gone to a wonderful restaurant, you have talked about anything, and nothing is moving. Why? Because there is time that it takes to put on a good face.”

It is also necessary to be able to communicate in Chinese, continues Maslov. “Chinese business does not communicate in English. He can pretend to communicate, but in reality, of course, the working language is Chinese,” the expert shared. Maslov also drew attention to the fact that China is very heterogeneous, so it is necessary to localize correctly. “We need to choose the right location. China is very different. And this is also an absolute illusion that we are reaching out to all of China. We are targeting a specific region of China. Each region has its own preferences and tastes. Everyone knows that, roughly speaking, in Sichuan Province they like spicy food, in Yunnan Province they like bitter-spicy food. Somewhere, for example, in northwest China, they like fatty foods and so on. That is, one and the same product cannot be introduced to the entire Chinese market. This is impossible,” Maslov emphasized.