Sporting goods wholesalers in Russia started experiencing difficulties in making payments for Chinese goods, which takes a toll on the trade flows. The issue is not pressing yet, as the industry accumulated large stocks of goods in the key categories.
Russia’s trade with China dropped by 9.9 percent in the first quarter of 2024 to $62.9 billion (€58.5 billion), compared with the first quarter of 2023, following steady growth in the previous two years, the Russian Federal Customs Service estimated. The downward trend seems to be picking up the pace, as the March trade volume was nearly 20 percent lower compared with the previous year. Preliminary data suggests that the April dynamics were similar.
Payment issues are the main factor driving Russian foreign trade down in 2024. Chinese banks started scrutinizing all transactions to and from Russia following US President Biden’s threat on Dec. 22, 2023, to impose secondary sanctions against banks and financial institutions in third countries facilitating trade with Russia.
The issue reportedly is growing more pressing by the month. In May, the Russia-China Trade Committee disclosed that 90 percent of payments by Russian businesses and individuals never reach the Chinese recipients. A few months earlier, there was a loophole in sending payments through banks in third countries, like Singapore or Kyrgyzstan, but that is no longer operational, said Ekaterina Kisevich, an analyst with the local foreign trade firm ATVIRA.
Local market players said that Russian sporting goods and the outdoor sector have already felt the brunt of the sanctions.
Alexey Grebtsov, Chairman of the Russian Outdoor Group, admitted that the payment problems weigh on Chinese imports. However, he argued that the share of trade impacted by this challenge is lower than 90 percent, as the Russia-China Trade Committee reported. Moreover, given the large warehouse stocks, the market has time to adapt.
“Our market is filled up to the brim. Warehouse stocks are sufficient [to meet the demand on the market] for at least 4 to 6 months,” Grebtsov said.
Over the last two years, China has solidified its position as the leading sporting goods supplier in the Russian market. As estimated by RBC, a Moscow-based think tank, Chinese goods accounted for a significant 80 percent of supplies to the Russian market in 2022.
In 2022, sales on the Russian sporting goods market were valued at Rub 230 billion (€2.6 billion), Evgeny Kuyvashev, spokesman for the Presidential Council for the Development of Physical Culture and Sports, revealed. China was the leading supplier in this segment. Local companies accounted for 14.5 percent of sales, while the share of Western countries was relatively low, Kuyvashev said.
Sporting goods imports from China keep flowing despite the headwinds, a source in Russian retail who wished not to be named commented. Due to the recently introduced restrictions, settlement costs went up by a few percent, but it is not a critical blow and unlikely to have a long-term implication on trade, the source said. He added that his firm eventually found a working solution to make transactions to Chinese suppliers. He declined to provide additional details due to the sensitivity of the subject.
