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Chinese banks comply with Russian clients to strengthen financial systems.

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TLDR: Chinese state banks are increasing their compliance efforts on funding to Russian clients due to the threat of secondary sanctions from the US. At least two Chinese banks have reportedly launched reviews of their Russian business involved in cross-border deals. The banks will sever ties with clients on the sanctions list and stop providing any financial services to the Russian military industry, regardless of currency or location of transactions. Non-Russian clients will also be reviewed for deals in Russia or transfers of critical items to Russia through third countries. China has not joined Western sanctions against Russia but has largely complied with them.

Chinese state banks are stepping up compliance on funding to Russian clients amid threats of secondary sanctions from the US, Bloomberg reported Tuesday, citing anonymous sources familiar with the matter. Last month, the United States threatened to cut off access to its financial system for foreign banks that back companies targeted for supporting Russia’s defense industry.

“Banks will sever ties with clients on the sanctions list and will stop providing any financial services to the Russian military industry regardless of the currency or the location of the transactions,” the outlet wrote. A “strict threshold” will be adopted in economic sectors where it is unclear if the Chinese banks’ Russia-related businesses could be impacted. Non-Russian clients will also reportedly be reviewed for deals in Russia or their transfer of critical items to Russia through third countries.

China’s financial regulatory administration did not immediately respond to Bloomberg’s request for comments.

Beijing has not joined Western sanctions against Russia in response to its invasion of Ukraine, and some of the country’s largest banks meanwhile have extended billions of dollars worth of credit to Russia since the war began. Nevertheless, China has largely complied with Western sanctions.

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