Cross-border yuan payment platform next challenge for Beijing
Launching a long-awaited cross-border yuan payment platform is one of the next challenges Beijing needs to tackle given the complexity in settling yuan trades and as offshore dealing in the currency swells.
Launching a long-awaited cross-border yuan payment platform is one of the next challenges Beijing needs to tackle given the complexity in settling yuan trades and as offshore dealing in the currency swells, said Evan Goldstein, the global head of yuan solutions at Deutsche Bank.
"In terms of major milestones that lie ahead, I think the first will be the improvement in the payment processing systems to ensure that international corporates can enjoy the same payment efficiency when using the [yuan] as they do with any other major global currency," Goldstein told the .
The current system, CNAPS (China's National Advanced Payments System), creates frictions as it uses different language codes and documentation formats from international standards.
To settle cross-border yuan payments, offshore banks will have to leverage clearing banks in different offshore centres that are connected to the mainland banking system through CNAPS.
In April, the central bank announced it would launch a new system, China International Payment Platform, within two years.
The platform is seen by bankers as a game changer as it makes cross-border payments more efficient and less labour-intensive by adopting an international messaging format.
The system will also bring more players into the business as smaller banks eligible under the system would be able to clear their own yuan with a mainland counterparty without having to go through offshore clearers.
"What is still not thoroughly understood by overseas market participants and investors is the fact that the internationalisation of the [yuan] is fundamentally a policy-driven event, and as such is subject to policy risk," Goldstein said.
According to Swift, the yuan is the seventh most-used currency for payments, accounting for 1.57 per cent of global payments as of August.
