CHINA — China’s financial regulator has asked the country’s largest banks to temporarily suspend new lending to five oil refineries recently sanctioned by the United States over their links to Iranian oil.

According to Bloomberg, a source said China’s National Financial Regulatory Administration (NFRA) instructed banks to review their exposure and business relationships with the companies involved.

Among them is Hengli Petrochemical (Dalian) Refinery Co., one of China’s largest private refineries.

For the time being, banks have been told not to extend new yuan-denominated loans, although they have not been instructed to withdraw existing credit facilities.

However, the NFRA, which oversees China’s banking and insurance sectors, has not responded to requests for comment.

The lending restriction directive was issued before China entered its long holiday period on 1 May.

The policy also contrasts with a notice issued by China’s Commerce Ministry on 2 May instructing companies to ignore US sanctions.

It marks the first time Beijing has applied rules introduced in 2021 to counter foreign sanctions, aimed at protecting domestic companies from what it considers unfair extraterritorial laws.

Nevertheless, the move highlights Beijing’s dilemma in demonstrating resistance to the administration of President Donald Trump while also shielding state-owned banks from the threat of US secondary sanctions.

Tensions between the two countries have intensified ahead of a planned meeting between Trump and President Xi Jinping in Beijing on 14–15 May.

Washington has continued escalating efforts to curb Iranian oil shipments, which remain a key source of funding for Tehran.

Late last month, the Office of Foreign Assets Control under the US Treasury Department blacklisted Hengli, targeting one of China’s major crude oil processing companies.

The US has also warned banks that they could face secondary sanctions if they support Chinese private refiners purchasing Iranian oil.

US Treasury Secretary Scott Bessent said the US government had sent letters to two Chinese banks warning of the risk of secondary sanctions if they were found supporting Iran-related transactions, although he did not disclose the banks’ identities.

Loan data compiled by Bloomberg showed China’s four largest banks — Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, China Construction Bank (CCB) and Bank of China — were still extending loans to Hengli as recently as 2018.

Neither the banks nor Hengli have commented.

Although China frequently condemns unilateral sanctions, Beijing has previously also quietly allowed major companies to comply with US sanctions in order to avoid wider damage to the domestic economy.

Large Chinese banks are known to have complied with US sanctions against Iran, North Korea and senior Hong Kong officials in order to maintain access to the US dollar clearing system.

In earlier cases, Beijing also redirected Iran-related transactions through Bank of Kunlun Co., a subsidiary of China National Petroleum Corp, which has also since been placed under US sanctions. (DK/ZH)