China is one step closer to launching its international cross-border yuan payments system, reported Reuters, which cited unnamed sources who indicated the move could occur as soon as September or October.
China International Payment System (CIPS as it’s referred to) is currently ready, according to the report, and is expected to ease the process for China’s yuan transactions by increasing its ability to be used globally at a faster and cheaper rate. It’s also expected to even the playing field between the yuan and the U.S. dollar, creating a more seamless payment system to make international transactions.
“The CIPS is ready now and China has selected 20 banks to do the testing, among which 13 banks are Chinese banks and the rest are subsidiaries of foreign banks,” an unnamed source told Reuters.
While the new anticipated date is expected to be just more than six months away, CIPS was initially expected to launch last year, but, as Reuters reported, it was delayed due to “technical problems.” The fall 2015 estimate, however, would still beat out industry estimates that pegged the system launch at sometime in 2016.
So how will CIPS change China’s payments system? For one, it’s anticipated to produce a more seamless system that’s universally understood. It is also expected to help widen the networks that can settle yuan payments, which the report indicated could lead to lower costs. This includes removing “operational inefficiencies” for companies who may be delayed because of payments taking too long to process.
“Misunderstandings under the current clearing system happen from time-to-time due to different languages and codings. The CIPS is a breakthrough since it will offer a united platform and enhance efficiency,” Raymond Yeung, an analyst at ANZ in Hong Kong, told Reuters.
According to Reuter’s report, China’s yuan is “one of the world’s top five payment currencies” — a title it gained last year as it passed up the Canadian and Australian dollars. According to SWIFT — a global transaction services network — yuan payments “increased by 20.3 percent in value in December compared to a year earlier, while the growth for payments across all currencies was 14.9 percent for the same period.”