Global payment system to promote greater use of yuan

BEIJING • China's central bank has completed drafting regulations for an international payment system that will facilitate greater use of the yuan globally, banking industry sources said yesterday.

The China International Payment System (CIPS) will be launched early next month, the sources said. The system will allow large international companies doing business with China to settle payments faster.

The launch of CIPS will remove one of the biggest hurdles to internationalising the yuan, and should greatly increase global use of the currency by cutting transaction costs and processing times.

Among the first batch of banks qualified to participate are 11 Chinese banks and eight Chinese branches of foreign banks, including HSBC, Citigroup and Standard Chartered, the sources said.

HSBC Holdings also became one of the first offshore commercial banks yesterday to get approval from China's central bank to issue yuan-denominated bonds in China's US$6 trillion (S$8.5 trillion) domestic inter-bank bond market.

HSBC was given approval to issue 1 billion yuan (S$222 million) of Panda bonds, while the Hong Kong branch of Bank of China was permitted to issue 10 billion yuan in debt, the People's Bank of China (PBOC) said in a statement released yesterday. Marking its landmark decision, the central bank said the change will "broaden the yuan-denominated financing channels for international commercial banks, promote the opening up of China's bond market and push forward renminbi internationalisation".

The central bank did not immediately comment on the CIPS.

PBOC said in June that Beijing would encourage overseas entities to issue yuan-denominated bonds in the onshore market and allow more categories of foreign institutions to enter its inter-bank bond market with increasing investment quotas. In 2005, the International Finance Corp, the private-sector arm of the World Bank Group, became the first foreign issuer in China's domestic inter-bank bond market.


A version of this article appeared in the print edition of The Straits Times on September 23, 2015, with the headline 'Global payment system to promote greater use of yuan'. Print Edition | Subscribe