New Reality of Legal Business with China: Challenges and Opportunities in the Post-SWIFT Era
Geopolitics and Banking Restrictions
Today’s financial reality has changed dramatically under the influence of global politics and economic sanctions. Disconnection from the international banking network SWIFT became a powerful tool of geopolitical impact, forcing market participants to quickly adjust and find new ways of conducting international business. Creation of alternative payment systems, such as the Chinese International Payment System (CIPS) and the Russian Financial Messaging System (SPFS), reflects efforts to reduce dependence on Western financial infrastructures and develop own mechanisms for settlements.For Russia, whose trade flows with China account for a substantial share of total exports and imports (about one-third), choosing settlement instruments becomes critical for survival and development of the economy. Major Russian exporters of energy resources and raw materials successfully transitioned to using national currencies and direct bank-to-bank interaction between countries. Meanwhile, smaller and medium-sized enterprises faced serious problems and had to resort to intermediaries’ services, correspondent accounts in overseas banks, or payments through third-party states like Kazakhstan or Belarus.An example is the practice of Russian companies utilizing the services of Chouzhou Commercial Bank (CZCB) in Zhejiang Province, known for its flexibility in servicing Russian customers. After the introduction of new US sanctions against Russian individuals and organizations, this Chinese bank drastically limited its activities with Russian clients, demonstrating high caution and risk aversion associated with possible secondary sanctions imposed by the United States.
Cultural and Regulatory Barriers
One key factor determining successful cooperation with Chinese business lies in building personal ties and understanding local cultural specificities. Formal legal agreements often carry less weight than trust built upon personal relations. This manifests itself across all aspects of business communication, starting from frequent visits between partners and ending with traditional events like tea ceremonies and business dinners involving consumption of the national drink maotai. Such elements help strengthen mutual trust and create a conducive atmosphere for deal-making.Moreover, localization plays a crucial role in achieving success in the Chinese market. Opening offices directly in China allows better comprehension of local legislation and customs of doing business. Russian financial institutions, such as Sberbank and Alfa-Bank, are considering opening branches in major cities like Beijing and Shanghai to improve service quality for corporate clients and enhance operational comfort. However, competition here is extremely intense because Chinese firms possess profound knowledge of the local market and vast resources.
Alternative Payment Systems and Instruments
Amidst declining reliance on traditional international payment networks, Russian entrepreneurs began exploring alternative channels for transferring funds. Among them stands out the China International Payment System (CIPS), created specifically to facilitate settlements in the national currency of China—the yuan. This system ensures fast transfer processing while minimizing exposure to Western sanctions. Though initially focused on large players in the financial sector, it gradually expands its scope of services and opens possibilities for smaller businesses too.Another solution is correspondent accounts, allowing Russian companies to receive money from Chinese counterparts directly through overseas partner banks. This mechanism simplifies transaction processes and reduces costs, albeit introducing additional fees and raising concerns over capital movement control.A separate topic concerns the development of digital assets, particularly the digital yuan (e-CNY). Despite uncertainties regarding the legal status of cryptocurrencies and digital assets, interest in them grows among both Russian and Chinese entrepreneurs. State-backed initiatives around digital yuan promise radical transformation of world financial architecture, providing foreign partners with unique opportunities for integrating into international payment procedures.
Prospects: Digital Yuan and Changing Financial Centers
Active promotion by Beijing of the idea of implementing a digital yuan indicates China’s intention to take leading positions in the global economy and financial sphere. This project aims to boost China’s position in international trade and diminish dependency on the US dollar. The Russian economy, closely integrated with Chinese economic initiatives, should carefully monitor developments related to e-CNY and promptly respond to shifts in game rules.Prospectively, bilateral trade volumes are expected to increase, shifting toward national currencies and fostering more joint projects within the framework of the “Belt and Road” initiative. Utilization of Chinese loan schemes and export risk insurance provided by state agencies enables Russian businesses to attract cheap borrowing resources and mitigate commercial risks.
Modern legal and financial engagement with China necessitates fundamentally different approaches. Traditional business models become ineffective amid growing political and economic barriers. Lawyers and financiers must acquire skills in working with novel tools and technologies, learn to consider regional peculiarities of doing business, and deeply integrate themselves into the Chinese financial ecosystem. Companies capable of overcoming cultural differences and bureaucratic obstacles obtain unique chances to utilize benefits stemming from stable Chinese economic growth and advantageous conditions for attracting investments and executing large-scale commercial projects. Others, however, will be forced to rely on alternative—and often costly—solutions, slowing down their pace of economic expansion and increasing operating expenses.