The Brussels-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) says it has obtained approval from Beijing for the establishment of a fully invested subsidiary in China.
“SWIFT is about to obtain an operating license for a fully invested subsidiary in China,” said Alain Raes, SWIFT’s chief executive for the Asia Pacific and Middle East, to 21st Century Business Herald at the sidelines of the Greater China Financial Markets Forum on 5 June.
SWIFT previously executed a memorandum of strategic cooperation with the Beijing municipal government on 16 January.
Fan Yifei (范一飞), vice-head of the People’s Bank of China (PBOC) said that the establishment of a fully owned Chinese subsidiary by SWIFT was an important step for PBOC’s financial regulatory infrastructure, and hoped that SWIFT would continually raise the level of localisation and compliance of its services.
Rae said that the renminbi accounts for a disproportionately small share of international settlements given that China comprises around a sixth of global GDP.
The renminbi ranks fifth amongst international currencies, with a mere 1.88% share of SWIFT-processed payments in April as compared to 40.76% for the greenback, 33.16% for the euro, 7.11% for the pound and 3.47% for the Japanese yen.
Rae told the Nikkei Review that he expects a “rebalancing over time” of this share, however, given economic and trading clout of China as well as the ongoing expansion of Chinese enterprises overseas via the Belt and Road Initiative.
“If you want to be part of the club you need to join the rule of the club,” said Raes.
“You need to have credibility, visibility, relevance the right regulatory environment and thrust in China.”
While SWIFT already operates two offices in China, Rae said the new subsidiary will provide a “better customer experience” by providing Chinese language services for invoices and transactions.
PBOC has also sought to facilitate international renminbi settlement with the launch of the Cross-border Interbank Payments System (CIPS) in October 2015, which provides clearing and settlement services for cross-border payments and trade.
According to a Nikkei survey CIPS saw 80% growth in value terms last year, processing 26 trillion yuan in payments.