In an address to the IMF’s main advisory committee, China’s deputy central bank governor, Yi Gang, sought to reassure trading partners about yuan weakness and said reforms to make the currency more flexible would continue.
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China made a fresh push for its yuan currency to be included in the global Monetary Fund’s benchmark currency basket on Friday and argued that recent reforms put it closer to qualifying.
The CIPS will process a broad range of cross-border RMB transactions, including settlement of RMB trade and capital projects as well as settlement of remittance transactions, it said.
China says the change in its exchange-rate regime earlier this year was meant to make the currency’s value more market-determined, a move in line with Beijing’s plans to gradually liberalize its economy, and one that would also help it get the yuan recognized as an global reserve currency.
Prior to launching CIPS worldwide, transfers in Chinese currency could be carried out mostly through offshore clearing banks in Hong Kong, Singapore or London.
The first batch of institutions directly participating in CIPS includes 19 domestic and foreign financial institutions, including several big western banks with operations on the mainland, the central bank said. The yuan was the fourth most-used currency for cross-border payments in August, with more than 100 countries using it for transactions.
“CIPS will enhance China’s connectivity with the global financial system, providing a highly efficient platform for cross-border RMB settlement”, Michael Vrontamitis, Standard Chartered’s head of trade, said in a release.
Lena Li, treasury manager at Ikea China, said direct RMB clearing enables a “simpler payment route and enhances Ikea’s liquidity management”. ICBC Singapore, for example, is the sole designated yuan clearing bank here.
“They would be able to speed up processing time by a day, and given enough volume, a day’s worth of float interest is valuable”, said Jim Antos, banks analyst at Mizuho Securities Asia. While the volume of transactions is well known, the rates that BOC has charged banks for clearing services and the profitability of that business have not been disclosed publicly.
“The launch of CIPS represents a turning point in the internationalisation of the yuan”.
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“However”, they added, “CIPS will provide flexibility for banks with strong onshore presence to arrange their clearing arrangements”.
