Currently, around a third of payments between China and the Asia Pacific region are conducted using renminbi. In the first half of 2015, there were more than RMB 5.7 trillion (USD 866.7 billion) worth of payments made to and from China using the renminbi. These payments are hindered by complicated routing procedures, the need to maintain multiple foreign correspondent accounts, liquidity shortages in some offshore RMB centers, different hours of operations between clearing centers, a lack of common standards between international and Chinese domestic payment systems, and China’s capital controls.ĭespite these hurdles, the use of the renminbi as an international payments currency has continued to grow rapidly. Cross-border payments are currently made via a patchwork of clearing hubs and correspondent banks. One of the main reasons for this discrepancy is the inadequacy of the infrastructure for cross-border renminbi payments. ![]() China is the world’s second largest economy, but as Figure 1 shows, the renminbi accounts for less than 2% of international payment transactions.įigure 1: Top 5 International Payment Currencies (November 2015) However, the renminbi’s role as a global payments currency is not commensurate with the size of China’s economy. The internationalization of the renminbi is one of the most significant developments in the global financial system in recent years. Russia launched its own cross-border payment system SPFS in 2014 and it was mainly used by its domestic institutions.Pacific Exchange Blog CIPS and the International Role of the Renminbi ![]() A person with knowledge of CIPS operations said that it would take time to switch from one system to another.Īpart from CIPS, there are also limitations to any alternative to SWIFT, said CSC analysts. However, with the yuan still far from a key global currency, foreign banks may not feel an urgent need for an alternative messaging network specifically serving Chinese entities outside of the region.Īlso, indirect CIPS participants still need to go through SWIFT to complete settlements. In 2020, 17.5% of the trade between the two countries were settled by yuan, an improvement from the 3.1% in 2014, according to CSC. Standard Chartered Bank (Hong Kong) Ltd said on February 14 that it has become the first foreign bank qualified as a direct participant in CIPS outside mainland China.įor now, CIPS still largely relies on SWIFT for cross-border financial messaging, but it has the potential to operate independently and have its own direct communication line between financial organisations.įor Chinese banks and corporates, CIPS can serve as a messaging system without the risk of exposing transaction information to the United States, BOC International said in a report in 2020.Ĭhina is Russia’s biggest trade partner for both exports and imports. They include 30 banks in Japan, 23 banks in Russia and 31 banks from African nations receiving yuan funds via infrastructure projects under Beijing’s Belt and Road Initiative, according to a survey by Nikkei newspaper in 2019.ĬIPS counts several foreign banks as shareholders including HSBC, Standard Chartered, the Bank of East Asia, DBS Bank, Citi, Australia and New Zealand Banking Group and BNP Paribas, according to data on Qichacha, an information provider that uses official company registration sources. ![]() As of end-January, CIPS said about 1,280 financial institutions in 103 countries and regions have connected to the system. It allows global banks to clear cross-border yuan transactions directly onshore, instead of through clearing banks in offshore yuan hubs.ĬIPS processed around 80 trillion yuan ($12.68 trillion) in 2021, a 75% increase from a year ago, according to state-backed newspaper Jiefang Daily. Several Russian banks are connected to China’s Cross-Border Interbank Payment System (CIPS), with one of them as a direct participant, analysts at China Securities Co (CSC) wrote in a research note published Sunday.īacked by the People’s Bank of China (PBOC), China launched the CIPS clearing and settlement services system in 2015 to internationalise yuan use. Western nations have announced a harsh set of sanctions to punish Russia for its invasion of Ukraine, which includes blocking some banks from the SWIFT international payments system.Ĭhinese payment-related stocks jumped on Monday as investors wagered that kicking banks out of the SWIFT system would benefit China’s own cross-border payment system, CIPS, and accelerate the development of the country’s digital currency, the e-CNY or digital yuan.įounded in 1973, Belgium-based SWIFT is used by banks globally for cross-border financial transactions.
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