A southern Chinese appliance maker is facing difficulties in shipping its products to Russia. As reported by Reuters, exporters have faced difficulties in conducting business in Russia's market due to the challenges of operating outside of official channels.  

China, Russia Reportedly Use 'Underground' Channels

The challenge lies not in any issues with the gadgets themselves, but rather in the restrictions imposed by China's major banks on payments for such transactions.These restrictions are a result of concerns over US sanctions.

"Transactions between China and Russia are expected to shift towards underground channels," stated a representative from a Chinese trade organization in an interview with Reuters. 

The Guangdong-based company is exploring the option of using currency brokers operating along China's border with Russia to facilitate payments for its electrical goods, according to Wang, the company's founder who prefers to be identified by his family name.

Since the invasion of Ukraine in 2022, the US has implemented a variety of sanctions on Russia and Russian entities.

Allegations have been made regarding China's commercial shipments potentially supporting Russia's military industry, prompting US lawmakers to take action by initiating the drafting of sanctions against Chinese banks involved in facilitating this trade.

Amidst the threat of sanctions, several major financial institutions, including prominent state banks in China, have chosen to limit transactions related to Russia.

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Chinese Investors Continue Using Cryptocurrencies

Despite being banned in China since 2021, cryptocurrency could still offer a potential solution.  However, China's investors have continued to pursue cryptocurrencies this year despite the restrictions, which may also provide a way for exporters to bypass certain customer verification processes.

Although some smaller banks are still willing to facilitate business between the countries, it has resulted in lengthy queues lasting for months for those who wish to open an account. 

This issue is observed among dealers on both sides of the border. Other lenders in China are also reconsidering their connections with Russia. 

According to Business Insider, restrictions have also become more stringent in countries like the United Arab Emirates, Turkey, and even Austria, all as a consequence of increasing US sanctions rhetoric.

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