China's launch of its international payment system (CIPS) this year should end the monopoly that the country's yuan clearing banks enjoy, giving foreign banks a share of the mushrooming yuan clearing business.
Seven of the 20 banks selected to participate in the system initially are foreign, sources told Reuters.
About 80 percent of cross-border yuan transactions are cleared through 14 Chinese clearing banks in offshore hubs, with Bank of China Hong Kong handling most of that. The rest is done through correspondent banks on the mainland.
"CIPS actually puts all its members in an equal position in terms of yuan clearing, which will be a boost for foreign banks' agent bank business since most yuan transactions are handled by Chinese clearing banks now," said Wilson Chan, a senior consultant to the Institute of Bankers in Hong Kong.
This is significant for foreign banks because yuan-denominated cross-border trade settlement was worth 6.55 trillion yuan ($1.06 trillion) in 2014, more than 20 percent of China's trade volume. That is expected to climb to over 50 percent by 2020, HSBC estimates.
CIPS is expected to roll out as early as September or October and will replace a cumbersome patchwork of networks.
Bankers believe CIPS will make automation possible, bringing costs down and making using the yuan more attractive for companies.
"CIPS will become a strong push for the yuan's internationalization as the unified platform will definitely create more interest in the currency," said Julien Martin, head of the RMB Competence Centre at BNP Paribas.
Source: http://www.globaltimes.cn/content/914788.shtml
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