(9 October 2015 – China) The People’s Bank of China (PBoC) has selected 19 banks to participate in the launch of its global payment system. The move is seen as a major step to facilitate yuan clearing transactions, bolstering the country’s desire to internationalise its currency, challenging the US dollar.
The cross-border interbank payment system, known as China International Payment System (CIPS), will remove one of the biggest hurdles to boosting yuan liquidity globally by cutting transaction costs and processing times.
Among those financial institutions selected, eight are Chinese subsidiaries of foreign banks, including ANZ, Deutsche Bank, Citi and HSBC.
The central bank said in a statement that CIPS will be used to support cross-border goods and services trade settlement, direct investment, as well as financing and individual fund transfers.
The new system is expected to provide the yuan with an even playing field against other major global currencies as it will use the same messaging format as other international payment systems, helping to promote the currency in global trade where the dollar still dominates.
It will also raise the global profile of the yuan as the International Monetary Fund considers whether to include its reserve basket, alongside the dollar, sterling, euro and yen.
“Because of the fast growth of cross-border RMB businesses, there is increasing demand for an international RMB clearing platform that adopts global market standards and offers efficiency in terms of trading time and language as well as risk and liquidity management,” Helen Wong, HSBC's Greater China Chief Executive told Reuters.
“We believe CIPS will meet that demand, boosting RMB use worldwide and paving the way for China's currency to become truly global,” she added.
China's yuan became the fourth most-used world payment currency in August, overtaking the Japanese Yen, global transaction services organisation SWIFT said on Tuesday.
Prior to the launch of CIPS, cross-border yuan clearing had to be executed either through one of the offshore yuan clearing banks situated in major across the world or else with the help of a correspondent bank within China.