How China opened the door to creating a direct rival to US payment systems
Beijing has removed several key restrictions on its payment system, allowing it to expand beyond yuan settlements, economist says
China’s recent changes to the rules governing its global payment system could pave the way for turning it into a genuine alternative to Western networks, according to a new report.
Beijing now appears to be moving towards building the Cross-border Interbank Payment System (CIPS) into a global platform compliant with multicurrency settlements and other foreign payment channels, said the study led by Ju Jiandong, a chair professor at Tsinghua University’s PBC School of Finance.
Beijing recently undertook the first major update to the business rules governing the CIPS – which previously focused on yuan-denominated payments – in eight years, with the new version coming into effect in February.
In the revised regulations, the system’s mandate has expanded from cross-border yuan transactions and financial operations to include the offshore yuan, as well as “other business approved by the People’s Bank of China”.
The new rules also include a line explicitly mandating the creation of separate operational guidelines for “the processing of cross-border payments in foreign currencies such as Hong Kong dollars through the CIPS”.
The updated regulations have also eliminated a set of strict rules on which financial institutions can participate in the CIPS, instead authorising operating institutions to formulate their own management rules for participants.