The Economist’s special report gave a set of data showing China’s arms support for Russia. We also know that where there are barriers, there must be high profits. In addition to weapons, the content of China's trade with Russia is all-encompassing. Unexplainable supplies such as military and non-military, or not originally military but used for military purposes, are very popular not only among the official but also among the private sector.
There is much clear evidence about private trade exchanges. I will choose three as samples here. The first one is the leading e-commerce platform in Russia. It is stationed in the Pearl River Delta (Shenzhen) and the Yangtze River Delta (Jiangsu and Zhejiang) to attract investment and encourage cross-border traders to supply goods on their platform. Although these e-commerce platforms seem to be an era behind, local demand is not as picky as customers in major e-commerce countries in China and the United States. High profits drive small and medium-sized production enterprises and immobile traders to be very active.
The second is that reports of making huge profits by reselling cars and spare parts to five Central Asian countries have been common a while ago, and have even extended from cars to other large equipment. We have reason to guess that on the one hand, there is real demand, and on the other hand, there is also the feasibility of dismantling the machines and selling them to Russia. After all, chips, motors, control circuits, etc. are all scarce products.
The third is that during this period, to avoid being sanctioned by the United States, China's banking industry has tightened its trade with Russia. In particular, local banks on the border that had previously had border trade business have become more cautious. Border trade has always been robust, and even if there are restrictions, there are still solutions.
The biggest need of these export traders, which is to receive payment, cannot be intercepted. Border banks or large banks generally use cross-border RMB for settlement, entrusting counterpart banks in Russia to convert rubles into offshore RMB locally and then remit them to the beneficiary bank. This can avoid being monitored by the U.S. dollar system and reduce trade. It can also reduce the exchange rate losses of merchants and improve exchange efficiency. It is somewhat similar to Kunlun Bank’s trade model with Iran. Another channel is third-party payment institutions that are outside the mainstream financial system. Third-party payment institutions with foreign exchange pilot qualifications such as L Payment open payment accounts for exporters and e-commerce platforms to conduct fund settlement; payment institutions open trade settlement and custody accounts in local banks through different entities in various countries to conduct fund settlement. Settlement. Banks cannot see or penetrate the actual import and export parties. When banks need to understand the use of remittance funds, payment institutions will provide so-called "real trade background" information, and more powerful payment institutions will outsource the bank's review of documents. The authenticity of these documents cannot be said to be entirely doubtful, but at least some of them are doubtful. To meet the requirements of anti-money laundering, the remittance routes of third-party payment institutions will be designed to be very complicated, including transfers through Central Asia-Middle East-Hong Kong and other places to conceal the true trading parties.
As the saying goes, under heavy rewards, there must be brave men. Then, under the current situation of sanctions on Russia, ultra-high returns will continue to extend various paths. The CIPS system originally existed to support avoiding European and American monitoring. It only needs a risk-bearing payment institution as a carrier, and banks can be exempted from liability. Of course, payment institutions can also use cryptocurrencies more securely, but after all, there are still exchange costs, handling fees, etc., which increase friction costs. Therefore, going further, I speculate that digital RMB wallets will penetrate users in Russia, North Korea, and Central Asian countries rapidly. This is also the design intention of US dollar replacement and RMB internationalization. Once the currency is unified, cross-border free trade will not be far away.
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