/ world today news/ Thirty Russian banks have connected with the Chinese payment system CHIPS, an analogue of SWIFT. Dozens are awaiting approval of applications. Now trade will be easier and logistics will become more predictable – not only for large companies, but also for small and medium-sized businesses.
Fast growth
The need for streamlining has been long overdue. The growth of trade between Russia and China (almost a third in the past year) requires fast and accurate payments. The chairman of the Russian-Asian Union of Industrialists and Entrepreneurs (RASIP) Vitaly Mankevich estimates mutual trade in just four months at 71.15 billion dollars. According to Prime Minister Mikhail Mishustin, 70% of transactions are carried out in national currencies. In addition, more and more banks offer deposits in yuan – about fifty now.
The ability to pay quickly and securely independent of SWIFT is necessary for effective cooperation in the fields of energy, construction, scientific research and trade, including parallel imports. In case of failed payments, deliveries are delayed, logistics are disrupted. This is a threat to business.
“The main problem with payments now is that they don’t go through. Or they last much longer than we would like. In fact, when you pay, you don’t know if the money will go to the recipient. With CHIPS, there won’t be such problems,” explains the partner of “Payments and transfers” Georgiy Mihailets.
Now 30 Russian credit institutions are connected to the Chinese settlement system. For now, however, only indirectly. In practice, this means that operations will have to be carried out through correspondent banks. Only Chinese companies or their affiliates have direct access to the system, for example the Russian branch of the largest bank ITCBC.
There is a nuance
In this regard, experts see several difficulties: incomplete functionality, extended time for processing payments, as well as “suspended status” – the correspondent can exclude the participant at his discretion. Mihailets suggests that formal requirements can limit direct contact and that it can sometimes be very expensive.
“There are probably two problems – organizational and technical. In organizational terms, each bank must personally agree with the Chinese side and most likely adapt the work to the requirements of CHIPS. In technical terms, it is the creation of software and computer tools and staff training “, says Mankiewicz.
At a May business forum in Shanghai, VTB CEO Andrey Kostin said: “Amid the explosive growth of cross-border payments between Russia and China – more than 200 percent in the last quarter through our bank alone – the need for Russian banks to connect directly to the system CHIPS is making itself felt more and more.”
According to him, for the domestic economy, the yuan has actually become a substitute for the dollar, and its demand is growing. In addition, it makes sense to expand the market of financial instruments in Chinese currency in Russia – many citizens would prefer to keep their savings in yuan, Kostin added.
Meanwhile, those willing to join the Chinese payment system are no less. Roman Chernov, executive director of the Russian National Association of Participants in Financial Communications (“Rosfincom”), said that CHIPS is unable to cope with the flow of applications. Some wait several months. Connecting is a complex process both technically and legally. It also requires setting up internal application systems.
Alternatives
To date, ten banks have been suspended by SWIFT, including Sberbank, VTB, BKB, RSHB. There are cases when there is no official ban, but blocking sanctions do not allow making transfers in foreign currency. Among such credit institutions are “Alfa Bank”, “Transcapitalbank”, “Investtorgbank”, Far Eastern Bank.
At the moment, about 40 banks work with Swift, including “Tinkoff”, “Solid” and “Cifra”. Some have limitations. Thus, for Gazprombank, the transfer fee has increased from one to three percent, and the minimum amount is $20,000. The same was established by Raiffeisenbank, as the service can only be used by premium customers who connected to the package before February 23, 2023.
The best alternative to connecting with a foreign system would be to attract foreign partners to the Russian SBP (quick payment system). “It is one of the most modern and technologically advanced from the point of view of both the end user and the banks and stores associated with it,” Mihailets emphasizes. In this way, the SBP can serve a single space within the SCO or BRICS.
However, experts acknowledge that there are still political and methodological difficulties. Therefore, the domestic payment system remains a product for domestic consumption, and China’s ICPS is a relatively safe way to ensure uninterrupted supplies and stable trade relations between Moscow and Beijing.
Translation: V. Sergeev
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