China is just months away from launching its international payment system, it has been reported.
According to Reuters, the China International Payment System (CIPS) is expected to launch in September or October. Greatly reducing cross-border transaction costs and processing times, it is claimed that CIPS is likely to put the yuan on a more equal footing with other global currencies such as the US dollar.
Currently yuan transactions are conducted across a ‘patchwork’ of networks, causing delays. But the introduction of CIPS will provide a much smoother process for international deals conducted in the currency.
A senior banking source, quoted by Reuters, said: “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 imminent launch of CIPS is the latest move by China to push the yuan as a global currency in recent years. Data recently published by global transaction services provider SWIFT revealed that the yuan became one of the world's top five payment currencies in November 2014, superseding both the Canadian dollar and the Australian dollar.
According to SWIFT, yuan payments increased by 20.3% in value in December compared with a year earlier, while the growth for payments across all currencies was 14.9% for the same period.
CIPS was initially expected to be launched in 2014 but was delayed due to technical issues. But this announcement will come as a surprise to the market with many participants not anticipating it to be available until 2016.