Shanghai Opens Cross Border Interbank Payment System to Facilitate the Yuan
China Cross Border Interbank Payment System is designed as an expressway that will facilitate the yuan’s use in international trade and investment that started its operations in Shanghai. The system of CIPS will provide services of cross border clearing and payment for all domestic and foreign financial institutions. Considered as an important infrastructure construction of country’s financial system, the CIPS is expected to be effective in increasing the global usage of the currency by cutting transaction costs and processing times and replace the former system that is composed of a number of agent banks.
Deputy governor of the People’s Bank of China Fan Yifei said, during the system’s opening ceremony of the establishment of the CIPS is considered a milestone as the country is accelerating it infrastructure construction of its financial system. It is also a sign that indicates a major progress in building a modern payment system that covers both domestic and foreign markets. Experts ar also saying that the system will be detach from one of the biggest hurdles in the internationalization of the yuan.
The Cross Border Interbank Payment System started after a global transaction service provider Swift reported that the yuan have surpassed the Japanese Yen and became the world’s fourth biggest payment currency. The yuan denominated payments has accounted for 2.79 percent of the global market has expanded from 1.39 percent in January. The CIPS opening fulfilled the promise that was made by Premier Li Keqiang that by the end of the year the CIPS will be launched and will support further the development of the offshore yuan market.
The first phase of the CIPS around 11 banks and eight foreign banks were approved by the central bank that will directly participate in the transactions under the new system.