FirstFT: Chinese lenders extend exposure to Russian banks after western sanctions

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Good morning. Chinese lenders stepped in to extend billions of dollars to Russian banks as western institutions retreated from the country during the first year of Moscow’s invasion of Ukraine.

The moves by four of China’s biggest banks are part of Beijing’s efforts to promote the renminbi as an alternative global currency to the dollar.

China’s exposure to Russia’s banking sector quadrupled in the 14 months to the end of March this year, according to the latest official data analysed for the Financial Times by the Kyiv School of Economics. 

The lenders took the place of western banks, which came under acute pressure from regulators and politicians in their home countries to exit Russia, while international sanctions made doing business much harder.

“The loans by Chinese banks to Russian banks and credit institutions, which are for the most part a case of the yuan taking the place of dollars and euros, show the sanctions are doing their job,” said Andrii Onopriienko, deputy development director at the Kyiv School of Economics, who compiled the data. Here’s more on Russia’s embrace of the renminbi.

Join FT correspondents James Kynge, Global China Editor; Eleanor Olcott, China Technology Correspondent; Sun Yu, China Economics Reporter and expert economist Tao Wang from UBS, for an exclusive FT subscriber event to assess the implications of China’s economic slowdown and its struggle with deflation. Register for free here and submit your questions ahead of the webinar here.

Here’s what else I’m keeping tabs on today:

• Black Sea grain deal: Russia’s president Vladimir Putin is expected to meet his Turkish counterpart Recep Tayyip Erdoğan in Sochi to discuss reviving the Black Sea deal that allowed Ukrainian grain to reach world markets. The meeting comes a day after Russia launched a massive drone attack on Ukraine’s southern Odesa port region, hitting grain shipping infrastructure on the river Danube.

• Holidays: Financial markets will be closed in the US (Labor Day) and Vietnam (Independence Day).

Five more top stories

1. An investigation in South Africa has rejected a US allegation that the country supplied weapons to a Russian ship under US sanctions that was docked at a Cape Town naval base. President Cyril Ramaphosa said the inquiry “found that there was no evidence to support the claim” from the US ambassador to Pretoria earlier this year. The claim came after rising frustration in Washington over South Africa’s ties to Russia.

2. China is building battery plants far beyond levels needed to meet domestic demand for electric cars and grid energy storage. Battery manufacturers are following a pattern exhibited in other industries such as steel and solar panels, industry executive warned, where Chinese companies benefit from subsidies to take a huge share of the global market and squeeze out competition internationally. “We are worried,” said Olivier Dufour, co-founder of Verkor, a French battery start-up backed by Renault. Read the full story.

• More China news: China’s slowing growth is sparking warnings of contagion in Asia, as waning consumer demand and slower manufacturing hit the region.

3. Terry Gou, the billionaire founder of Apple supplier Foxconn, has left the company’s board following his decision to run to be Taiwan’s next president. The move appeared aimed at shielding the world’s largest contract electronics manufacturer from any political fallout from his campaign for the election on January 13. Here’s more on Gou’s future with Foxconn as he pursues Taiwan’s presidency.

4. Hundreds of protesters gathered in southern Syria this weekend calling for President Bashar al-Assad’s removal as, as demonstrations that erupted over the country’s economic crisis entered their third week. Crowds chanted “Bashar, we don’t want you!” and “Come on, leave oh Bashar”, resurrecting one of the 2011 uprisings’ most popular slogans. FT Middle East correspondent Raya Jalabi reports on the protests.

• More Middle East news: Iran has begun a crackdown on dissent ahead of this month’s first anniversary of the death of Mahsa Amini in police custody that triggered the country’s biggest protests in more than a decade.

5. Republican primary candidate Nikki Haley said it was time for America’s older political leaders in both political parties to “step away” as the former US ambassador steps up her attacks on US gerontocracy to boost her bid for the White House in 2024. Haley’s comments came after Mitch McConnell, the Republican senate leader, had a health scare last week, appearing to freeze while speaking to reporters for a second time in as many months. Haley blasted the Senate as the “most privileged nursing home in the country”.

The Big Read

The death of the Dalai Lama has the potential to spark one of the most extraordinary stand-offs in international politics. Behind the scenes, there are already signs that both the Tibetan exile community and the Chinese leadership are stepping up preparations for his passing. The succession process would be a tug of war that could also draw in India and the US, making the Nobel laureate’s health a matter of growing international interest.

We’re also reading . . . 

• Military briefing: Here’s why the sandy soil in southern Ukraine may give Kyiv’s counteroffensive a better chance of success than some of its allies fear.

• China vs the wine world: Wine critic Jancis Robinson does a blind tasting of Chinese wine alongside top bordeaux. Here’s what she learned.

• How not to network: A nakedly self-serving approach to building connections puts people off, writes Miranda Green.

Chart of the day

India’s Hindi and regional language entertainment sector has grown into one of the world’s largest film industries, churning out more movies than any other nation every year since 2005, according to Sony. The Japanese entertainment giant’s chief Kenichiro Yoshida discusses Sony’s plans to crack Bollywood in this interview with the FT.

Take a break from the news

Cantonese food is best known in the west as a cheap takeaway. But restaurants such as The Chairman in Hong Kong are changing perceptions abroad of one of China’s four great cuisines. The restaurant’s owner, Danny Yip, tells FT Magazine why Cantonese food is not what you think it is.