The People’s Bank of China (PBOC) has recently undertaken measures to better standardise cross-border renminbi payments and settlements made via its Cross-Border Interbank Payment System (CIPS) – also known as the China Interbank Payment System, resulting in a dramatic reduction in handling costs.
PBOC issued the “Notice Concerning Undertaking Application Trials for Financial Data Exchange Standards in the Cross-border Renminbi Payments Sphere” (关于开展跨境人民币支付领域金融数据交换标准应用试点的通知) on 6 June, for the purpose of “increasing the convenience of banking institutions and export enterprises implementing cross-border payments and receipts, and integrating services enterprises into primary global funds correspondence channels.”
The Notice arrives follows the deployment an enterprise version of CIPS’s standard transceiver on 17 May, for the purpose of “processing transactions between banks and enterprises, with the goal of raising payments efficiency and reducing processing costs. ”
The CIPS standard transceiver supports the use of the Legal Entity Identifier (LEI) code that is assigned to all counterparties to financial transactions, as well as the ISO 20022 standard for electronic data exchanges between financial institutions.
The transceiver enables enterprise clients to issue cross-border payments and receipt instructions, connecting upstream and downstream circuits and achieving integrated handling of cross-border renminbi operations.
Analysts and members of industry say that the launch of the device has already dramatically raised cross-border payments efficiency and reduce processing costs, greatly facilitating cross-border trade and investment settlements.
“The device can satisfy the the efficiency needs of two or more enterprise users simultaneously, greatly accelerating the implementation of international operations between enterprise clients,” said one member of industry to Diyi Caijing.
“The standardiser transceiver overcomes the shortcomings of lengthy procedures, low time efficiency, and lack of transparency in funding nodes…payments efficiency has been increased by 50%, and procedural fees reduced by approximately 70%.”
CIPS is a payments system which provides cross-border renminbi clearing and settlement services between participants.
The system does not provide for the direct transfer of funds, but instead issues payments order to participating financial institutions which have banking relationships, who then settle the orders by means of their corresponding accounts.
CIPS was first launched in October 2015, and in March 2016 signed an Memorandum of Understanding with SWIFT to deploy it as a communications channel with SWIFT’s members.