China has received some criticism and skepticism over its cross-border payments initiative, spearheaded as CIPS — the Cross-Border Inter-Bank Payments System.
Analysts point out that the payments system operates just 11 hours a day and only out of Shanghai. At present, the system does not include connections to the U.S., and fees associated with payments using CIPS are unclear. This makes China’s international payments play a bit unconvincing to some.
But payments messaging service SWIFT has been brought on by China to help strengthen CIPS’ capabilities.
Reports said Friday (March 25) that the company has signed a memorandum of understanding (MOU) that sees SWIFT aiding CIPS in its development. The MOU was signed Friday.
“China International Payment Service Corp. is looking forward to benefiting from SWIFT’s platform and service to provide an efficient and convenient channel to the global financial community,” stated CIPS Executive Director Li Wei after signing the agreement. “We aim to provide an inclusive platform to capture cross-border RMB flows to all types of participants, which will significantly extend the reach of RMB internationalization.”
China has been moving to push its local currency into the global market following a long period of strict regulations on the yuan, which had prevented it from being used on a widespread basis outside of the country.
But recent data released by the People’s Bank of China found that the renminbi is the fifth most used currency for trade finance in the world. CIPS is largely seen as an effort to propel the yuan onto the global currency stage.
SWIFT Chief Executive of Asia-Pacific and EMEA Alain Raes, who also signed the agreement, pointed to the ways their collaboration makes sense for the global payments market.
“SWIFT is a global messaging provider supporting more than 150 payment and settlement systems, and CIPS is a payment system,” he said. “There are natural synergies between global financial messaging services, such as those provided by SWIFT, and payment systems. Working with such market infrastructures is at the heart of our business.”