Russian banks offer yuan accounts as Putin turns to China

Russian banks are opening retail accounts dealing in yuan as China eyes a chance to dominate the country's economy.

Russia's second largest bank VTB Bank has begun offering a Chinese yuan savings account with an interest rate of up to 8pc, hailing the currency as "one of the most affordable and promising options for investing funds" after the country was hit by Western sanctions.

A number of other Russian banks are now eyeing the possibility of opening settlement accounts and deposits in yuan, Russian newspaper Kommersant reported on Wednesday.

The move comes days after it emerged that a string of Russian lenders including Sberbank and Alfa Bank were planning to use China’s UnionPay system to provide customers’ bank cards after Visa and Mastercard boycotted Russia in response to its invasion of Ukraine.

UnionPay is the dominant payments handler in China but has a small market share outside of the world’s second-largest economy.

There have been fears that excluding Russia from international financial systems will cause it to back rival systems with the help of China, one of the few nations that could support Russia in mitigating the impact of tough sanctions.

The European Union this week urged Xi Jinping, the Chinese president, to put pressure on his "friend" Vladimir Putin to end the war in Ukraine on Monday.

Chinese foreign minister Wang Yi said that while Beijing would organise aid to Ukraine, the “friendship” between Beijing and Moscow was “rock solid”.

Australia's intelligence chief Andrew Shearer, director general of the Office of National Intelligence, warned on Wednesday that a "troubling new strategic convergence" between Beijing and Moscow has developed and the risk of "major power conflict" had grown since the invasion of Ukraine.

However, Russians are currently facing a shortage of smartphones as Chinese manufacturers have begun cutting shipments to the country following a collapse in the rouble.