A long-awaited China International Payment System (CIPS) that would facilitate international usage of the yuan (CNY) is ready and could be launched as early as September or October, according to news agency Reuters.
Described as “a worldwide payments superhighway for the yuan” the new system promises to replace a patchwork of networks and allow easier renminbi (RMB) transactions, further accelerating the internationalisation of the Chinese currency.
Reuters quoted a senior banking source, who told the agency: “The CIPS is ready now and China has selected 20 banks to do the testing, among which 13 banks are Chinese banks and the rest are subsidiaries of foreign banks. The official launch will be in September or October, depending on the results of the testings and preparation.”
Commenting on the report, Philippe Gelis, chief executive (CEO) and co-founder of UK-based foreign currency exchange Kantox said: “The launch of CIPS is a long-awaited development that will help nudge the UK’s business perception of China from the go-to overseas provider of manufactured goods to a very real and lucrative trading opportunity.
“Successful exporting relies not just on open trade corridors, but on foreign currency exchange rates and risk protection. The ability to make payments in CNY rather than another currency, typically the US dollar (USD), brings three key benefits for UK businesses.
“Firstly, a reduction in cost, as Chinese suppliers will no longer need to include the 3-5% premium that they typically incorporate into their contracts to protect them from foreign exchange risk when receiving payment in currency other than CNY. Secondly, shorter transaction times – it takes an average of four to six days less to process a CNY payment, compared with a USD or euro.
Finally, the upcoming CIPS will reduce the margins of error by streamlining the payment process and replacing what is currently a patchwork of networks with a much easier process.
“Against this backdrop, businesses should check that they are receiving quotes in CNY as well as in dollars, to ensure they are taking advantage of cost savings. They should also check that their foreign exchange provider is able to support CNY transactions and the associated China National Advanced Payment System [CNAPS] codes.
“While only 2% of UK exports go to China currently, the flourishing Chinese economy and rise of the yuan should be real factors in helping UK businesses to escape the uncertainty of the unstable eurozone, and move away from a reliance mainly on the USD in international transactions.”
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