Are Chinese Banks Better At Cross Border Trade Finance?

If you look at where real trade flows are growing and who is actually funding them, the answer is blunt. For many cross border corridors, especially those linked to Asia, Chinese banks are already better partners for trade finance than a large part of the Western banking system. They are not perfect and they carry their own risks, but in terms of appetite, reach, and practical support for clients that trade with or through China, they now set the pace in several segments.

At the same time, the global trade finance gap remains large. The Asian Development Bank has estimated unmet demand for trade finance in the hundreds of billions of dollars in Asia alone and more than one trillion dollars globally. That gap is most painful for emerging market exporters and importers that fall outside conservative risk appetites. This is exactly the space where Chinese banks and policy institutions have chosen to expand, backed by trade flows, surplus savings, and strategic policy goals.

What “Better” Means In Trade Finance Terms

Better does not mean cheaper in every case or easier in every situation. In cross border trade finance, banks are more useful when they can do three things reliably. Support flows where others have little appetite. Clear and settle in the currencies that matter to the transaction. Connect into real projects and counterparties on the ground rather than just booking paper risk.

Chinese banks, especially the larger state owned commercial banks and policy banks, tick those boxes more often today in emerging market corridors than many of their Western peers. They are integrated into supply chains, they see the underlying projects, and they have strong support from a policy framework that treats trade as a national priority rather than a peripheral business line.

The Renminbi And Cross Border Payment Infrastructure

One of the clearest indicators that Chinese banks have grown into serious cross border trade financiers is the rise of the renminbi in global trade settlement and trade finance. Research and SWIFT data show that by 2023 the renminbi had overtaken the euro as the second most used currency in trade finance, with a share near 6 percent of global trade finance flows, up from around 2 percent only a few years earlier. That step change is driven by Chinese banks using their balance sheets to support RMB denominated trade in Asia, Africa, the Middle East, and beyond.

On the infrastructure side, China has built a network of offshore renminbi clearing banks in major financial centers and regional hubs. Federal Reserve research notes that China has designated more than 30 offshore renminbi clearing banks in over 25 jurisdictions. Many of these clearing banks are subsidiaries of large Chinese banks, which gives them a direct line into the domestic payment and clearing system.

In parallel, the Cross Border Interbank Payment System has been expanded. Recent announcements highlight partnerships between CIPS and financial institutions across the Middle East, Africa, and Asia that allow Chinese banks to complete cross border payments more directly in renminbi. For clients that trade heavily with Chinese counterparties, this infrastructure reduces friction and settlement risk compared with routing everything through third country currencies.

Belt And Road And Policy Bank Trade Finance

Chinese policy banks and large commercial banks have also become central lenders to infrastructure and trade projects under the Belt and Road Initiative. Independent tracking shows cumulative Chinese engagement under the Belt and Road banner in excess of one trillion dollars since 2013, including both investments and construction contracts across well over one hundred countries.

Policy banks extend loans to low and middle income economies to finance ports, power plants, rail, and logistics assets. Chinese contractors then build these projects and Chinese banks provide working capital, letters of credit, and related trade finance to support the flow of equipment, fuel, and materials. That direct pairing of project finance and trade finance is something many Western banks have retreated from, especially in higher risk jurisdictions.

For exporters of machinery, construction services, and commodities into Belt and Road markets, this creates a clear advantage. Their Chinese banks often understand the project sponsors, the sovereign risk, and the construction chain better than banks that sit outside the ecosystem. That understanding translates into real credit appetite, not just polite interest.

Why Chinese Banks Often Say Yes When Others Say No

Impact On The Trade Finance Gap

The ADB Trade Finance Gaps, Growth, and Jobs surveys have highlighted an ongoing shortfall in available trade finance relative to demand, estimated at over a trillion dollars globally and several hundred billion dollars in developing Asia alone. That gap has proven stubborn. Western banks have reduced cross border exposure in many risky markets under pressure from capital rules, conduct risk, and reputational concerns. Supply has not kept up with demand.

Academic work on trade finance in East Asia points out that trade finance is a relatively low loss business when structured correctly, and that it offers Chinese banks a straightforward way to deploy capital while supporting policy objectives. Chinese banks have taken that logic seriously. They have grown their trade portfolios into Asia and other developing regions where the gap is most acute.

There is still a significant shortfall for smaller companies that do not trade with or through China. For flows tied to Chinese trade, however, the availability of documentary credits, supply chain finance, and project linked working capital is often higher from Chinese institutions than from Western peers.

Trade Offs And Limitations

None of this means Chinese banks are the right answer for every cross border transaction. Their internal policies are strict in their own way. Documentation requirements can be demanding. Sanctions and regulatory changes can disrupt certain corridors. In some sectors, Western banks still provide better structured commodity finance, risk distribution, and hedging, especially where the ultimate exposure is in OECD markets.

Corporates also need to consider legal frameworks, dispute resolution, and transparency standards when they rely heavily on any one banking system. Domestic policy priorities in China can affect credit availability, currency policy, and outbound lending appetite.

That said, for any trade flow that involves Chinese suppliers, contractors, or offtakers, ignoring Chinese banks in 2025 and beyond usually leaves money and options on the table.

Practical Implications For Corporates And Investors

FAQ: Chinese Banks And Cross Border Trade Finance

Are Chinese banks now the main competitors to Western banks in trade finance?

In many Asia linked corridors, yes. The renminbi has become the second most used currency in global trade finance, ahead of the euro and behind the dollar, which shows how far Chinese banks have moved into cross border trade finance. Western banks still dominate some flows, but they no longer have the field to themselves.

Do Chinese banks offer better pricing?

Pricing varies by client, risk, and structure. Chinese banks can be competitive on fees for trade linked to Chinese exports and Belt and Road projects, partly because they have better visibility on the underlying flows. In other cases, particularly where risk lies entirely outside Chinese supply chains, Western banks or regional banks may offer better terms.

Is it safer to rely on Western banks due to regulation and governance?

Western banks operate under frameworks that many clients know well. Chinese banks operate under different domestic rules but are still heavily regulated and systemically important in their home market. Safety depends more on the specific bank, the jurisdiction, the collateral, and the structure than on a simple East versus West label.

Can Chinese banks close the global trade finance gap on their own?

No. The estimated global trade finance gap is too large for any single banking system. Chinese banks play a major role in reducing the gap for flows that touch China or Belt and Road projects. A mix of global banks, regional banks, export credit agencies, and private credit funds is still required to address the full shortfall.

When does it make sense to approach Chinese banks first?

It usually makes sense when the trade flow is centered on Chinese suppliers or buyers, when the project is part of a Belt and Road corridor, or when counterparties are keen to transact in renminbi. In those cases, Chinese banks often have the clearest mandate and the strongest commercial incentive to support the transaction.

Disclaimer: This article is for general information only and does not constitute legal, regulatory, tax, or investment advice. References to Chinese or Western banks are generic and do not refer to any specific institution. Trade finance availability depends on credit, collateral, KYC and AML outcomes, sanctions rules, and internal approvals by regulated counterparties. Financely is not a bank and does not provide deposit taking, securities dealing, or investment management services. Any transaction must be documented under formal agreements with appropriate licensed entities.