October 8, 2015 – China has launched an international payment system, a step forward in internationalising its currency, the renminbi or yuan, state media reported today.
The first phase of the China International Payment System (CIPS) launched in Shanghai would provide capital settlement and clearing services for cross-border yuan transactions for financial institutions domestically and abroad, reports stated.
This would also enhance efficiency and increase global use of the Chinese currency by cutting costs and processing times, said Fan Yifei, People’s Bank of China vice president.
DBS Bank (China) Limited was among the first batch of banks selected to be a member bank of China’s first international payments system.
“As the first and only Singapore bank chosen for the launch, the bank is committed to leverage its experience in Asian financial markets like Singapore and Hong Kong to support developments in Renminbi (RMB) internationalisation and China’s financial reforms,” DBS said in a statement on Thursday.
Neil Ge, CEO of DBS China, said: “Improving the financial infrastructure for the internationalisation of the RMB is essential, and the launch of CIPS will bring China closer to having a major currency for both trade and investment purposes.”
Xinhua said cross-border yuan clearing previously 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.
It quoted Fan as saying CIPS will have a significant role in shoring up China’s real economy and promoting the “going abroad” strategy of domestic enterprises.
The system, developed and administered by the central bank, enables market participants outside China to clear yuan transactions with their Chinese counterparts directly from 9am to 8pm during any working day under a coding format in line with international practice.
According to global transaction services organisation SWIFT, China’s yuan became one of the world’s top five payment currencies in November last year, overtaking the Canadian dollar and the Australian dollar.
China has accelerated the pace of yuan internationalisation in recent years. The central bank designated 10 official yuan clearing banks last year, bringing the total to 14 globally that can clear yuan transactions with China.