'Milestone' renminbi cross-border interbank payment system launched

China's Cross-Border Interbank Payment System was launched in Shanghai on Thursday, designed as an "expressway" to facilitate the yuan's use in international trade and investment.

The system, or CIPS, is a global clearing platform for real-time settlements in the currency.

It connects China with most offshore yuan centers and countries in Asia, Oceania, Europe and Africa, and supports cross-border goods and services trade settlement, direct investment, fundraising and personal remittances.

Considered an important addition to the country's financial infrastructure, the CIPS is expected to increase global usage of the yuan by cutting transaction costs and processing times.

At the system's opening ceremony in Shanghai, Fan Yifei, deputy governor of the People's Bank of China, or the country's central bank, called the system's creation a milestone, adding it "will enhance efficiency of the yuan's cross-border settlement and promote its global use".

Experts said the system helps clear one of the "biggest hurdles" to the internationalization of the yuan.

The launch came two days after global transaction service provider SWIFT reported that the yuan overtook the Japanese yen to be the world's fourth-largest payment currency during August.

Yuan-denominated payments accounted for 2.79 percent of the global market in the month, up from 1.39 percent in January of 2014, said SWIFT.

The CIPS' opening also fulfilled the promise made by Premier Li Keqiang at the Summer Davos forum last month in Dalian, Liaoning province, that "by the end of the year, the CIPS will be launched to support the further development of the offshore yuan market and the 'going global' strategy of Chinese enterprises".

In the system's first phase, 11 domestic and eight foreign banks have been approved by the central bank to directly participate in yuan transactions using the CIPS.

Standard Chartered Bank (China) said it had completed its first direct international yuan clearing from China to Luxembourg, for the Swedish furniture retailer Ikea China, using the CIPS.

Sam Xu, head of its transaction banking in China, said: "It is an honor to be selected in the first batch of CIPS direct participants, and to close this landmark transaction for Ikea.

"Leveraging direct access to CIPS, we can clear yuan payments with China in extended operating hours to cover different time zones more efficiently," he said.