China threatens response to EU sanctions on banks, firms

China’s close ties with Russia had subjected its banks to similar sanctions from the US before, prompting them to re-evaluate businesses and clients

The latest round of European sanctions hit a number of companies and banks in China, prompting Beijing to protest and promise a response that would safeguard and protect its own firms.

The European Union sanctioned two Chinese banks and five companies based in China on Friday as part of the latest round of sanctions against Russia over its invasion of Ukraine.

In a response on Monday, China’s Ministry of Commerce said the sanctions “seriously harmed the trade, economic and financial ties” and that it would take necessary steps to “safeguard the legitimate rights and interests of Chinese firms and financial institutions.”

It’s the first time that Chinese banks have been added to the European sanctions list since the Russian invasion of Ukraine in 2022. The sanctioned banks are Heihe Rural Commercial Bank Co. and Heilongjiang Suifenhe Rural Commercial Bank Co., according to a statement from the European Council. They were listed for providing cryptocurrency services that were frustrating the purpose of the sanctions, according to the EU.

The two banks couldn’t immediately be reached for comment.

The EU had earlier proposed adding them to a list of financial institutions that have allegedly aided Moscow “by processing transactions or providing export financing for trade operations” that circumvent EU sanctions, Bloomberg News reported last month.

China protested that proposal when it was reported, with Chinese Foreign Ministry spokesman Lin Jian saying in June that “the normal exchanges and cooperation between Chinese and Russian companies are consistent with WTO rules and market principles. They do not target any third party and should not be disrupted or affected.”

Earlier this month, Foreign Minister Wang Yi vowed to retaliate if the banks were listed, according to the South China Morning Post, which also said that the Chinese ambassador to the EU had been lobbying to stop the listing.

China’s close ties with Russia had subjected its banks to similar sanctions from the US before, prompting them to re-evaluate businesses and clients. Some of its state-owned banks tightened curbs on funding to Russian clients early last year, after the US authorized secondary sanctions on overseas financial firms that aid Moscow’s war effort in Ukraine.

In February 2022, Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. moved to restrict financing for Russian commodities, Bloomberg News had reported, even though Western sanctions at that time spared Russia’s energy sector. The nation’s largest state banks also have a history of complying with previous US sanctions against Iran and North Korea to avoid losing access to the US dollar clearing system.