UnionPay is afraid of Russian banks

Even as China continues to refuse to join Western sanctions, Chinese companies such as China UnionPay are still concerned about being caught in the sanctions system.

The bank card service provider has refused to work with Sberbank – Russia’s largest bank – and stopped negotiating with other financial institutions named on the country’s sanctions list. Therefore, the recent plan to issue UnionPay cards in Russia was also forced to cancel.

While UnionPay accounts for only about 1% of bank cards issued in Russia as of 2020, demand for their cards in this market has increased after Visa and Mastercard stopped services due to the Ukraine crisis. However, the company did not want to take advantage of the opportunity to expand.

The Chinese government has repeatedly affirmed that economic and trade activities between China and Russia will continue to take place normally, and criticized the sanctions imposed by the US, Europe and other countries in response. Russian military campaign in Ukraine. In a speech last week at a forum, Mr. Xi Jinping opposed the “indiscriminate use of unilateral sanctions”.

More than 80% of Chinese companies in Russia continue to do business as usual, according to statistics from Yale University (USA). This is in stark contrast to Japan, the US and Germany, where about 90% of businesses have left, downsized or suspended operations.

However, some Chinese enterprises still take a more cautious approach. The Bank of China and the Industrial and Commercial Bank of China have limited funding for Russian goods.

“The US is increasing scrutiny of Chinese financial institutions that want to promote business in Russia,” the source, who asked not to be named, told Reuters. Nikkei. When Washington urged Beijing to stop supporting Moscow, it signaled the risk of economic consequences for companies still operating in Russia.

Being cut off from the international payment network SWIFT would be painful for Chinese banks. Nearly 80% of the world’s cross-border transactions are processed in dollars or euros, and only 2% in yuan. Therefore, when weighing the potential profit if taking advantage of the current business expansion opportunity in Russia against the risk of sanctions, Chinese companies find it not worth it.

Even if Chinese banks are not directly affected by Western sanctions, they could still face heavy losses in the event of prolonged economic or financial turmoil in Russia. The China-led Asian Infrastructure Investment Bank froze all Russia- and Belarus-related activities in early March, citing it as “protecting the financial integrity” of the institution.

Outside of the financial sector, drone maker DJI Technology said earlier this week that it would suspend business in Russia and Ukraine pending a compliance review. The company has raised concerns about the possibility of its products being used for military purposes.

State-owned Sinopec is also said to have suspended talks with Russian petrochemical company Sibur over its plan to form a joint venture to invest up to $500 million in a new petrochemical plant.

Session An (according to Nikkei)