Russia and China have developed a banking settlement system to avoid international supervision

Russia and China have developed a banking settlement system called “China Track”, which enables mutual trade at bypassing the Western financial system and international supervision – said Reuters.

“China Track” is based on a netting mechanism, which allows intermediary banks to balance transactions between importers and exporters without involving the Swift system or institutions from countries covered by restrictions. In practice, this means that payment details are effectively hidden from Western financial institutions and authorities, which minimizes the risk of detecting and possible secondary sanctions, “Reuters said based on his own sources.

The system was created by the largest banks covered by Western sanctions And it works thanks to the networks of intermediaries registered in countries that Russia considers friendly. It has been operating for some time and has not yet experienced any serious failures.

Trade exchange of Russia and China reached a record level of USD 245 billion last year, despite problems with payments and commissions, reaching up to 12 percent. Due to the fact that Chinese banks have become too cautious to conduct business with Russia explicitly and sew their ties from the USA. This issue became so important that the Russian leader Vladimir Putin and his Chinese equivalent of the XI Jinping discussed her during the visit of the first one in China in May 2024.

In the face of western sanctions imposed on Russia after the invasion of Ukraine, Moscow began intensive alternative solutions, especially in cooperation with Beijing. Transactions in the “China Track” system usually take place in Juany or Rubles, which additionally supports the strategic goals of China and Russia, aimed at weakening the dollar dominance in international trade. The solution is currently intended mainly for large Russian companies exporting goods to China, but it is planned to extend it to smaller entities.

Bankers emphasize that the system works stable and no problems with payments have been recorded, although the process itself is not yet fully automated and requires individual approval of many transactions. Reuters sources also claim that the Chinese exporting to Russia are also settling with the help of a new system.

“China Track” is considered a breakthrough tool in developing new financial architecture, independent of the West. This system can be the beginning of a greater trend of development in global finances and the growth of regional payment solutions that gain importance in times of geopolitical tensions and growing distrust of existing international institutions.

“The program allows direct cooperation with 11 Chinese provinces that produce most of the goods exported to Russia. The cost is calculated on the basis of an official exchange rate, without an additional spread,” one of the banking experts told Reuters, wanting to maintain anonymity, just like everyone else in the case of speaking in this matter.

He added that only one settlement session is currently taking place a week (on Thursdays), but it is planned to introduce the second session day until the end of April, and the demand for this service is growing.

Reuters also added that the cost of the service is from 0.5 percent. up to 1 percent transaction values, while outside the “China Track” system – 2-4 percent, and in the peak moment of sanctions against Russia was 12 percent, therefore it is profitable for business entities in both countries. (PAP)

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