China launches International Payment System to globalize Yuan

In Banking and Finance
October 8, 2015

China has launched the first phase of its much anticipated China International Payment System (CIPS), a milestone in bolstering yuan’s global usage and furthering cross-border clearing of its currency from the Chinese mainland instead of offshore centres abroad. The CIPS provides capital settlement and clearing services for cross-border yuan transactions for financial institutions domestically and abroad.

Previously, cross-border yuan clearing had to be done either through one of the offshore yuan clearing banks in places like Hong Kong, Singapore and London, or else with the help of a corresponding bank on the Chinese mainland. CIPS will have a significant role in shoring up China’s real economy and promoting the “going abroad” strategy of domestic enterprises, Fan said.

China’s yuan became one of the world’s top five payment currencies in November 2014, overtaking the Canadian dollar and the Australian dollar, according to global transaction services organisation SWIFT. China has encouraged global use of the yuan in recent years.

The launch of the CIPS was expected to boost the Shanghai Free Trade Zone (FTZ) launched in 2013 as a test bed for new reforms. After Shanghai, China launched FTZs in Guangdong, Tianjin and Fujian.