According to Reuters, the People’s Bank of China has initiated the cross-border interbank payment system, known as China’s International Payment System (CIPS), which aims to boost yuan liquidity in the global financial markets. The new payment system is expected to bolster the currency’s usage by cutting transaction costs and processing time.
The CIPS will be used to facilitate cross-border transactions, direct investments, financing, and individual fund transfers as well. A total of 19 banks participate in the CIPS, eight of which are the Chinese subsidiaries of foreign lending institutions.
The CIPS is designed to use the same messaging format as other international payment systems in particular the SWIFT. This will open the door for China’s national currency to the global trade where the greenback has been reigning supreme so far.
Meanwhile, the yuan managed to overtake the Japanese yen to become the world’s fourth most-used payments currency in August, the SWIFT said. However, China is still waiting for the International Monetary Fund’s decision on whether to add the yuan to its special drawing rights basket. China’s authorities hope that the launched payment system could speed up the process.
