US penalties handed down on ZTE, the Chinese telecoms giant, are a reminder that despite January’s partial lifting of sanctions on Iran after UN nuclear inspections, they can still bite.

Previously, the Bank of Kunlun, set up to handle oil for loans and infrastructure deals between Beijing and Tehran during the embargo, had been cited for violations. Chinese commercial and policy banks nonetheless were gearing up last year for legal business, supported by a flurry of official initiatives. China’s “One-Belt One-Road” outward investment campaign envisions a tenfold increase in Sino-Iranian economic engagement over the next decade to $500bn; Iran took a tiny 2 per cent founding share in the Asian Infrastructure Investment Bank; and the countries discussed bilateral currency swap lines. However, the early optimism has evaporated as terms are worked out for handling contract arrears for $20bn in unblocked Iranian funds in Chinese accounts, and mainland banks, with their own worsening bad loan problems, come to grips with the severity of Iran’s financial system crisis flagged both by President Hassan Rouhani and newly elected reformist parliamentarians.

Beijing faces new banking and trade competition post-sanctions from Europe, and from Asian rivals India, Japan and Korea, which have mobilised their own state and export-import lenders.