China launches cross-border payment system
China’s cross-border interbank payments system, established as a yuan-based alternative to the interbank Swift network, has launched with 11 domestic banks and eight foreign institutions onboard. The CIPS platform will be used to support cross-border goods and services trade settlement, direct investment, as well as financing and individual fund transfers, with the aim of boosting yuan liquidity globally. CIPS uses global payment standards and enables same day clearing across Asia, Oceania, Europe and other time zones through extended operating hours.
It will also act as a buffer against US influence over the Swift network which is viewed by the West as a powerful tool in the imposition of economic sanctions against rogue states. Iranian banks were only recently allowed to reconnect to Swift as part of a deal that saw the country limit its nuclear activity in exchange for an end to economic sanctions.
Last year there was a clamour for Russia to be expelled over the crisis in Ukraine, with the European Parliament among those floating the possibility, prompting Swift to put out a statement saying that it “regrets” the political pressure it came under.
The Chinese government has also been spooked by rumours that the US national Security Agency has been secretly tapping messages sent over the Swift network, despite repeated denials by the Belgian-based co-operative.
The launch of the new platform also comes as data from Swift shows that China’s yuan has become the fourth most-used world payment currency, overtaking the Japanese Yen.
Irrespective of the murky back story, the launch of CIPS has been welcomed by international transaction banks. Carl Wegner, managing director, Greater China head of global transaction banking at Deutsche Bank, says: “By integrating the existing Renminbi cross-border payment and settlement channels, CIPS will improve the efficiency of cross-border clearing to meet the increasing demand for Renminbi worldwide.”
Source: Finextra – China launches cross-border payment system
