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Published on : Jul 14, 2015

China has finally announced to launch its international payments system. The scaled back system will be used for cross-border yuan trade deals only and will not include capital-related transactions. This move is expected to delay the transactions of securities purchases and foreign direct investment worth billions of dollars. China’s aim to offer a single network for securing deals in yuan was delayed last year owing to technical problems. The watered down version of the international payments system and the recent stock market crash has widely affected the country’s measures to bolster its financial infrastructure.

The China International Payment System or CIPS, will be launched later this year and will act as a complimentary network for settling trade-related deals in yuan for the Chinese clearing banks spread across the globe. People close to the matter have revealed that though the payment system does not include many things but the system is under pressure to work efficiently and deliver. The People’s Bank of China has so far declined to comment on the matter. According to the reports, depending upon the initial tests of the system by a group of 20 banks, the network would be launched officially by September or October this year. The system will also let large international firms to do business with China through faster settlement of payments with the help of features such as CIPS overlap with the U.S. and European working hours.

The CIPS would not pose as a threat to SWIFT. However, it is expected to slowly end the present system of correspondent Chinese clearing banks in offshore yuan hubs. The CIPS is expected to boost Shanghai as a global offshore yuan hub. The CIPS will further help the companies outside China to clear transactions with their Chinese firms directly.