China's payment system spreads across Africa and Asia amid US trade war
China's cross-border yuan payment system has signed up more financial entities from Africa, Central Asia and the Middle East, as Beijing accelerates efforts to promote the global use of its currency amid rising tensions with the United States.
A group of six financial institutions officially joined the yuan-based Cross-border Interbank Payment System (CIPS) as direct participants during a ceremony in Shanghai on Wednesday, becoming the latest entities to sign up to China's alternative to the Society for Worldwide Interbank Financial Telecommunication system.
The newcomers include the African Export-Import Bank, First Abu Dhabi Bank, South Africa's Standard Bank, Singapore's United Overseas Bank, the Kyrgyzstan-based Eldik Bank, and Chongwa (Macau) Financial Asset Exchange, a state-owned asset trading platform from the special administrative region, according to state broadcaster CCTV.
Beijing has been promoting the CIPS – which was first launched in 2015 – as it strives to expand the use of the yuan in global trade and hedge against any potential moves by the United States to impose financial sanctions on Chinese entities.The system had 174 direct participants as of the end of May, though most of them were made up of domestic and overseas branches of Chinese banks, as well as Chinese branches of global financial giants such as HSBC, JP Morgan and Citibank.
A direct participant refers to an entity that owns a CIPS account and can directly remit through the system, while indirect participants have to rely on others to complete transactions on their behalf.
A total of 175 trillion yuan) of transactions was made via the CIPS last year, an increase of 43 per cent year on year.
Beijing has been stepping up efforts to popularise the system in recent months as tensions with the US have risen over a slew of trade and technology issues, with Chinese officials warning of the danger of financial tools being weaponised.
'As geopolitical tensions escalate, traditional cross-border payment infrastructure is prone to being politicised and weaponised as a unilateral sanction tool, undermining the international financial order,' said Pan Gongsheng, governor of the People's Bank of China, at the Lujiazui Forum on Wednesday.While Pan did not name a specific country during the speech, the remarks were likely aimed at Washington.
Chinese academics have long warned of the danger posed by US financial sanctions targeting China, citing the Russia case, and anxiety in Beijing jumped after US President Donald Trump raised tariffs on Chinese goods to unprecedented levels in April.
Though Beijing and Washington have since signed a trade truce – which included an agreement to roll back tariffs on each other's goods for 90 days – tensions remain high, with the two sides yet to agree a permanent deal to de-escalate the trade war.
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