NewBeijing's international payments system scaled back for launch
Initial use of CIPS only for yuan trade deals, dealing a blow to Shanghai yuan hub
Beijing is set to launch a watered-down version of its long-awaited international payments system, using it only for cross-border yuan trade deals rather than also including capital-related transactions, two people with direct knowledge of the matter said.
The move would delay billions of dollars worth of transactions, including securities purchases and foreign direct investment, that would have gone through the system. In the US, roughly US$1.5 trillion goes through a similar transaction process daily.
It would be the second setback to China's ambitious plans to offer a unified network for settling deals in yuan after it failed to get off the ground as expected last year owing to technical problems. It also comes as other measures to open up China's financial infrastructure have been dented by the recent stock market crash.
The China International Payment System (CIPS), expected to be launched later this year, will now offer at best a complementary network for settling trade-related deals in the Chinese currency to a current patchwork of Chinese clearing banks dotted around the world.
"I think ambition stood before ability," said one person directly involved in the implementation of the project. "It doesn't include a lot of things, but there is pressure for delivery."
The official launch will be in September or October, depending on the results of tests and preparation work among a group of 20 banks.