China firms go 'underground' on Russia payments as banks pull back in fear of sanctions, using banned crypto payments

The threat of extending sanctions to banks in China is chilling the finance that lubricates even non-military trade from China to Russia.

This is posing a growing problem for small Chinese exporters, said seven trading and banking sources familiar with the situation.

As China’s big banks pull back from financing Russia-related transactions, some Chinese companies are turning to small banks on the border and underground financing channels such as money brokers - even banned cryptocurrency.

“Transactions between China and Russia will increasingly go through underground channels,” said the head of a trade body in a southeastern province that represents Chinese businesses with Russian interests. “But these methods carry significant risks.”

Making payments in crypto, banned in China since 2021, might be the only option, said a Moscow-based Russian banker, as “it’s impossible to pass through KYC (know-your-customer) at Chinese banks, big or small”.