Western sanctions are pushing Belarusian enterprises and banks to switch to settlements in national currencies. Thus, there have already been agreements at the governmental level to increase settlements in Russian rubles. Another currency they want to bet on is the Chinese yuan.
Experts predict that after limiting the circulation of dollars and euros many banks will start to offer accounts and deposits in Chinese currency, bank cards with yuan accounts and multicurrency ruble-yuan cards will appear. This trend is already visible in Russia, where banks are opening deposits in yuan and recording an increased interest in UnionPay cards.
Demand for cards of the Chinese payment system was spurred by the withdrawal of other international payment systems from the Russian market (the impossibility of using Visa and MasterCard cards issued by Russian banks both abroad and for cross-border payments), as well as the weak representation of the Mir payment system abroad.
“The situations in Belarus and Russia in the context of cooperation with China are somewhat different at the moment. Unlike Russia, which has a trade surplus with China, Belarus buys more goods in China than it sells there. If Belarus wants to make more settlements in yuan, it has to get them from somewhere. We have a negative balance anyway,” says Anastasia Luzgina, economist at BEROC (Kiev), referring to ilex.by.
The share of the yuan in the overall structure of payments in Belarus is quite low. This means there is potential for its significant growth, including in case of resumption of the swap agreement with the People’s Bank of China, says board member of the National Bank of Belarus Denis Goregliad.
In 2009 the National Bank of Belarus and the People’s Bank of China signed an agreement that provided for the exchange of national currencies in the amount of about $3 billion in equivalent. However, business entities of both countries showed little interest in the emerging opportunities. The devaluation of 2011, during which the Belarusian ruble depreciated by 2.9 times against the yuan, did not contribute to optimism for the extension of the agreement.
Belarus and China signed a second three-year currency swap agreement in 2015. The parties pledged to provide each other with about $1.12 billion in national currencies.
In general, settlements in Chinese yuan are not widespread in the sphere of export-import operations of Belarus. There was little demand for RMB loans from Belarusian enterprises, and foreign currency lending to individuals is prohibited by law. Deposits in yuan were not of interest to Belarusian depositors, who preferred dollars, euros, Belarusian and Russian rubles.
“We have learned one golden rule from the accumulated experience during our work in the sanctions regime: Chinese banks are always more loyal where not only a Belarusian company and a Belarusian bank, as a provider of its interests, but also a Chinese company is interested in implementing a foreign trade contract,” said Alexander Kashlach, director of the corporate business development department of Bank BelVEB.
“Indeed, if Belarusian companies have relations with Chinese partners, they can agree on the transfer of settlements in yuan. However, there may be difficulties with the Chinese banks, which are actively cooperating with America and the European Union, will not want to expose themselves to the risk of secondary sanctions, working with Russian or Belarusian business,” says Anastasia Luzgina.
Financiers believe that the success of the swap deal depends on the dynamics and structure of foreign trade, as well as the need of its participants in national or freely convertible currencies. For China, such an agreement is the next step to spread and increase the share of the yuan in world trade, as well as its gradual convertibility in the global market.
“China is interested in increasing settlement in renminbi. But it faces difficulties with limited currency convertibility. Yes, China is the world leader in terms of trade volume, but the same cannot be said for the volume of transactions in renminbi. However, the share of transactions in Chinese currency in the total volume of settlements may gradually increase. China is doing everything possible to achieve this. One of the measures to internationalize China’s national currency is the launch of the digital yuan. Unlike the private digital currency market, which is almost completely banned in China, the central bank’s digital currency project is gradually developing,” Luzgina said.
Seven Belarusian banks (Belarusbank, Belagroprombank, Belgazprombank, BelVEB, MTBank, Zepterbank and Fransabank, which is in the process of accession to Alfa-Bank) are currently offering yuan at their exchange offices. Banks buy 10 yuan for 3-4.5 Belarusian rubles, while they sell it for 5-6.5 Belarusian rubles.
“The Chinese yuan is not a freely convertible currency, but a restricted convertible currency, like the Belarusian and Russian rubles. China has a number of restrictions in the foreign exchange sphere: on the movement of capital, on the withdrawal of cash from the country. The yuan, thanks to the support of the People’s Bank of China, maintains its price stability. But when there were attempts to make the exchange rate freer, it began to fluctuate. So I would not say that opening deposits in yuan will save you from serious risks, such as depreciation,” – says Anastasia Luzgina.
UnionPay acquiring network coverage in Belarus has increased significantly. The cards of the Chinese payment system in Belarus are served by ATMs and terminals of Belarusbank, Belagroprombank and Belgazprombank. In August 2021, UnionPay stated that 65% of ATMs and terminals in Belarus accepted its cards.
Belgazprombank is engaged in issuing UnionPay cards. The bank confirmed the increased demand for cards of the Chinese payment system. In 2021, UnionPay showed the greatest growth rate in Belarus, having increased its number by almost 2.8 times to 8.9 thousand pieces. By comparison, there were 6.34 million Visa cards, 5.84 million MasterCard cards and 3.5 million BELCART cards.
The UnionPay website lists about 180 countries where their cards are supported, but in fact their number is less. UnionPay does not specify that only one bank or store may support the payment system in certain regions. Even the example of Belarus shows that not all countries are covered.
UnionPay is the Chinese national payment system, and it is primarily distributed in the domestic market of China, says Maxim Nalyutin, director and head of services to companies in the financial sector of Deloitte in the CIS.
However, according to him, Chinese tourists “in recent years have become a significant trend in most popular tourist destinations, and local businesses are trying to adjust to the usual payment instruments.”
“In the retail business, it’s too early to put trends in Belarus and Russia under a common denominator. Visa and Mastercard left Russia, but not Belarus. And difficulties for Belarusian users are connected either with the limits on receiving dollars and euros, which are introduced by banks, i.e. it has nothing to do with the choice of the payment system, or with limitations in the activities of the banks themselves. What will happen if Visa and Mastercard leave Belarus and more Belarusian banks are disconnected from SWIFT? I think, at the first stage there will be more orientation towards “Mir” cards and the Russian equivalent of “swift” due to Belarus’ greater involvement in trade with Russia and better integration of Belarusian banks in the Russian payment infrastructure. “The Chinese vector may develop in the future,” says Anastasia Luzgina.
In Belarus, UnionPay competes not only with Visa and MasterCard, but also with the cards of the internal payment system BELKART and its Russian partner Mir. Russian banks, in turn, have started working on UnionPay’s collaboration with Mir. Such a co-baying (working with two payment systems simultaneously) card can be paid in rubles in Belarus, Russia and some other countries.
“For the end consumer may incur higher costs due to double conversion. Let’s say you have a UnionPay card. You are going on vacation to a country where, for example, the euro is in circulation. Your rubles would first be converted into yuan, and then into euros. That means you would have to pay a lot of commissions. The yuan will take time to find its place in the structure of accounts and deposits in Belarus. This is not today. We can see that in Russia, where both trade volumes and better developed infrastructure are larger, the demand for the yuan and UnionPay cards is still not so great. Although recently these processes have intensified,” summarizes Anastasia Luzgina.