SHANGHAI: China started its much anticipated International Payments System, or CIPS, to allow cross-border international trade operations from and to China in its own currency, the yuan.
According to the Chinese official news agency Xinhua, CIPS – which allows financial institutions to provide cross-border services clarification and payments in the Chinese currency- will spur greater international use of the yuan.
This will remove a major obstacle to the use of the yuan, which aims to compete with the dollar and euro, in global trade.
Until Thursday the clarification of cross-border payments in yuan could only be done through a series of banks designated for the purpose in cities such as Hong Kong, Singapore and London, or with the help of equivalent banks in China.
CIPS will allow global companies to make direct payments to their Chinese partners in yuan and reduce bureaucracy and costs.
The system, announced in July 2013, was to become operational in early 2014, but was delayed by technical problems.
CIPS, developed and managed by the People’s Bank of China, or PBOC, works much like similar systems already applied to major world currencies and will be available from Shanghai, starting Thursday, every working day for 11 hours (9:00 a.m. to 8:00 p.m in Beijing).
According to PBOC Vice President, Fan Yifei, its implementation will have considerable impact on China’s real economy and increasingly encourage Chinese firms to go abroad.
The yuan already features among currencies widely used in international trade, and became the fifth most used worldwide last November, when it surpassed Canadian and Australian dollars, according to the Society for Worldwide Interbank Financial Telecommunication.
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