-
Advertisement
Banking & finance
EconomyChina Economy

What’s next for China’s yuan payment system? Adviser banks on close trade partners

Former ICBC chairman Chen Siqing says alternatives needed due to risk of financial weaponisation in US dollar-centric world

Reading Time:3 minutes
Why you can trust SCMP
1
China’s domestically developed Cross-border Interbank Payment System offers clearing and settlement services for cross-border yuan transactions. Photo: Shutterstock
Sylvia Ma

China should leverage bilateral and multilateral deals to accelerate the adoption of its cross-border payment system, a prominent political adviser has urged, as concerns deepen over the potential for intensified “financial weaponisation” in a global payment system centred around the US dollar.

“Given escalating geopolitical conflicts, frequent financial sanctions and a growing trend of financial weaponisation, the risk of ‘payment chain disruptions’ caused by excessive reliance on external systems is rising by the day,” said Chen Siqing, former chairman of Industrial and Commercial Bank of China (ICBC), the country’s largest bank in terms of assets.

“This must be taken very seriously and addressed with stronger countermeasures,” he wrote in the latest issue of China Finance, a publication supervised by the People’s Bank of China, the country’s central bank. The instrument that was the primary focus of Chen’s article was the domestically developed Cross-border Interbank Payment System (CIPS).
Advertisement

Chen also chaired Bank of China – another of the country’s “big four” state-owned banks with a greater international focus – from 2017 to 2019.

Now a deputy director of the foreign affairs committee of China’s top political advisory body, the National Committee of the Chinese People’s Political Consultative Conference, he is due to attend its annual meeting, scheduled to begin in Beijing next week.
Advertisement

He urged the country to explore bringing CIPS into its international trade and economic cooperation frameworks to expand its global adoption. This would include deeper collaboration with countries that have signed up to the Belt and Road Initiative – Beijing’s marquee initiative for infrastructure-led regional connectivity – as well as members of the Regional Comprehensive Economic Partnership trade pact, through stronger ties with their regulators and financial institutions.

The comments come amid a renewed sense of urgency in Beijing on the need to develop a Chinese alternative to the Society for Worldwide Interbank Financial Telecommunication (Swift) – the main artery for cross-border payments – as US-led financial sanctions have proliferated and fears persist that Beijing-Washington trade tensions could extend to the financial domain. Swift remains heavily reliant on the US dollar.

Advertisement
Select Voice
Select Speed
1.00x