The People’s Bank of China has initiated the cross-border interbank payment system (CIPS) to boost yuan liquidity in the global financial markets.
The CIPS expected to cut transaction costs and processing time. Its challenge is 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.
Moreover, CIPS is designed to use the same messaging format as other international payment systems, in particular the SWIFT. Experts believe that this will open the door for the Chinese yuan to the global trade where the greenback has been reigning supreme so far.
The first yuan clearing transaction was completed from China to Luxembourg for the Swedish IKEA through the China International Payment System.
Recently, China’s authorities were extremely cautious about an issue of the yuan's convertibility amid fear of losing control over the national currency rate.
