After the Russian attack on Ukraine, many Western banks withdrew from Russia. Chinese financial institutions have rushed to fill this void by quadrupling their commitment.
While Western financial institutions have withdrawn from Russia because of the attack on Ukraine, Chinese banks have made significantly more money available to Russia. According to calculations by the Kyiv School of Economics for the Financial Times, China's credit to the Russian banking sector has quadrupled by the end of March 2023.
The Industrial and Commercial Bank of China (ICBC), the Bank of China, the China Construction Bank and the Agricultural Bank of China increased their joint commitment to Russia by $2.2 billion within 14 months of the launch of the Russian attack on Ukraine, reaching 9.7 billion dollars. ICBC and Bank of China alone have made available about $8.8 billion.
Western sanctions are paying off
Chinese lenders have taken the place of Western banks that no longer support Russia due to international sanctions and pressure from their own countries.
"Loans provided by Chinese banks to Russian banks and credit institutions, where the yuan is mainly taking the place of the dollar and the euro, show that the sanctions are working," said Andrii Onopriienko, deputy director of development at the Kiev School of Economics.
However, some institutions in Europe remain active.
Austrian bank Raiffeisen, for example. This bank, the most committed to Russia, increased its assets by more than 40 percent by the end of March this year, to $29.2 billion. But since then, this financial institution has reduced its assets to $25.5 billion and is now looking for opportunities to withdraw from Russia.
China wants to break the dominance of the dollar
The moves by China's four biggest banks, meanwhile, are part of Beijing's efforts to promote the yuan as an alternative global currency to the dollar, the Financial Times reported.
The share of the yuan in world payment traffic is only 2.5 percent. For comparison, according to SWIFT, the global financial telecommunications company, the weight of the dollar is 39.4 percent and that of the euro with 35.8 percent.
In the plan to limit this dominance of Western currencies, transactions with Russia in the Chinese currency are intended to play a role. Trade between Russia and China reached a record $185 billion last year. The yuan now accounts for 16 percent of that amount, according to the paper.
According to the Central Bank of Russia, before the war in Ukraine, more than 60 percent of exports were still paid for in currencies that the country's authorities now describe as "toxic." These include the dollar and the euro. The yuan, on the other hand, accounted for less than one percent. /Deutsche Welle/
