The clearing of card transactions refers to the settlement of transactions and the transfer of funds from one bank to another, and by a bank to a merchant that accepts the card when someone uses it to make purchases.

“If Chinese consumers can go to other countries, and their payments there can be cleared in yuan, then this would increase the use of the yuan and help with its internationalisation progress,” said Nathan Chow, senior China economist at DBS Bank. “The move is also a signal that China is not sanctioning the businesses of American companies, despite tensions.”

The People’s Bank of China (PBOC) has also approved an application by Mastercard’s China joint venture to conduct bank card clearing operations in the country, but the US credit card company has not yet received a yuan network clearing license. Rival card giant Visa submitted its application in early 2018 and is still awaiting approval.

China aims to integrate its domestic payment services into the world’s financial system to create a global yuan clearing and settlement system for trade and investments. The development of domestic bank card firm Union Pay, as well as mobile payments apps from Alibaba’s Alipay and Tencent’s WeChat, have lowered the costs and increased the convenience of using the yuan. Alibaba owns the South China Morning Post.

“I’m already used to making purchases through mobile payments. Even when you go to Thailand for fun, it has been easy to pay with Chinese apps at the convenience and drug stores there,” said Cat Xiong, 32, who works in the social studies education sector in southern China.

American Express said the bank card clearing network, being built by the joint venture, will process both online and offline payment transactions, and the company will cooperate with leading Chinese mobile wallet service providers, according to a statement in June.

Its advantage lies mainly in its expansive cross-border international network that can accommodate both Chinese travelling abroad and foreigners visiting China, analysts said.

“American Express is trying hard not to miss the second boat in China. They already did with the first wave as China blocked foreign credit card providers and developed Union Pay, followed by Alipay and WeChat,” said Alicia Garcia Herrero, chief economist for Asia-Pacific at French investment bank Natixis.

Morgan Stanley chief China economist Robin Xing Ziqiang said that after the slow progress in yuan internationalisation in recent years, it has again become a priority for Chinese policymakers to increase use of the yuan in light of the emerging post-coronavirus “multipolar world” resulting from geopolitical tensions.

Herrero cautioned that the growing sophistication of Chinese financial institutions did not necessarily mean that the yuan had reached a tipping point to become a fully fledged reserve currency. The hurdle to yuan internationalisation comes from getting sovereign wealth managers, merchants and consumers to accept the currency without China lowering its restrictions on capital flows while making the yuan freely convertible.

Some of China’s much-delayed financial opening-up measures were promised two decades ago as conditions for China’s entry into the World Trade Organisation in 2001.

“It is certainly a breakthrough for a foreign company to gain entry into the previously untouchable Chinese payment market,” said Allison Malmsten, a market analyst at Daxue Consulting. “It goes against the anti-globalisation direction of the Trump administration and represents the will of companies to collaborate across borders – creating an opportunity for finances to flow between the two countries.”