Towards an international payments system in China: An overview of progress and remaining challenges

Abstract

China is in the process of turning the Renminbi (RMB) into a fully fledged global currency. The goal is to make the RMB among the top three currencies in the world. In spite of the rapid worldwide expansion of the RMB, its internationalisation still faces many challenges. China therefore announced ambitious plans in April 2012 to build a new system for international payments. This system, called Cross-Border Interbank Payment System (CIPS), should further facilitate cross-border RMB clearance among market players. Though the international RMB clearing platform will take several years to develop, the basic functionality is expected to markedly improve access for foreign corporates. International clearing and settlement of RMB payments will be easier. International banks and corporates will certainly benefit from this new system, as they will be able to use RMB directly in their financial transactions. The planned rollout of this new interbank payment system, originally planned for 2014, has been delayed to at least 2016, owing to the complexity of integrating RMB into the global system and the long-term sustainability of the system itself.