Latest news with #Cross-BorderInterbankPaymentSystem
Business Times
3 days ago
- Business
- Business Times
DBS sees rising demand for yuan settlements from Chinese exporters
[SINGAPORE] DBS Group, South-east Asia's largest lender by assets, is seeing growing interest from Chinese exporters to settle trades in renminbi (RMB), or yuan, particularly with counterparts in Latin America and the Middle East, a senior executive said. 'Right now, you see the Chinese exporters, some are beginning to ask and say, I'm going to sell in RMB, please settle in RMB,' said Han Kwee Juan, speaking to Reuters in his first media interview since becoming DBS' group head of institutional banking in January. 'Is that a trend that will continue? I think that it's something that they will continue to ask for as they trade more with the rest of the world, outside of the US,' he said. The shift comes as decades of unwavering faith in the US dollar's dominance in global trade and capital flows faces scrutiny. Major emerging market economies are stepping up efforts to trade in local currencies, underscoring efforts to reduce reliance on the dollar in the global financial system. However, Han said that most settlements outside of China remain 'largely in dollars'. The bank's subsidiary, DBS China, has been a member of China's Cross-Border Interbank Payment System (CIPS) since 2015. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up China launched CIPS in 2015 to promote the yuan's usage in international trade. It allows global banks to clear cross-border yuan transactions directly onshore, instead of through clearing banks in offshore yuan hubs. DBS's settlement flows through the CIPS clearing system grew 30 per cent year-on-year in 2024, Han said, though he maintained that the shift toward more yuan-denominated settlements remains gradual. In a wide-ranging interview, Han spoke of how businesses are dealing with the uncertainty over Trump's tariffs and outlined DBS's growth strategy in the current economic environment. 'One of the things that we have been growing this year is we have been growing our capability for FI clearing,' he said. 'We have been quite purposeful in terms of investment that we have made in the clearing capabilities.' The bank is also looking to capitalise on its institutional banking business to drive its return on equity, which currently stands at 17 per cent, Han said. Last week, DBS posted a quarterly profit that beat estimates, sending its shares to a record high. 'By being able to work with the customers holistically, not just with lending, but also with advisory and as well as cash management, enables us to not only just look at lending or (net interest income) as a source of revenue, but really growing our fee-based revenues,' Han said. REUTERS
The Star
3 days ago
- Business
- The Star
DBS sees rising demand for yuan settlements from Chinese exporters
A customer walks past automated teller machines (ATM) at a DBS Group Holdings Ltd. bank branch in Singapore, on Wednesday, Feb. 17, 2021. - Photographer: Lauryn Ishak/Bloomberg SINGAPORE: DBS Group, Southeast Asia's largest lender by assets, is seeing growing interest from Chinese exporters to settle trades in renminbi (RMB), or yuan, particularly with counterparts in Latin America and the Middle East, a senior executive said. "Right now, you see the Chinese exporters, some are beginning to ask and say, I'm going to sell in RMB, please settle in RMB," said Han Kwee Juan, speaking to Reuters in his first media interview since becoming DBS's group head of institutional banking in January. "Is that a trend that will continue? I think that it's something that they will continue to ask for as they trade more with the rest of the world, outside of the U.S.," he said. The shift comes as decades of unwavering faith in the U.S. dollar's dominance in global trade and capital flows faces scrutiny. Major emerging market economies are stepping up efforts to trade in local currencies, underscoring efforts to reduce reliance on the dollar in the global financial system. However, Han said that most settlements outside of China remain "largely in dollars". The bank's subsidiary, DBS China, has been a member of China's Cross-Border Interbank Payment System (CIPS) since 2015. China launched CIPS in 2015 to promote the yuan's usage in international trade. It allows global banks to clear cross-border yuan transactions directly onshore, instead of through clearing banks in offshore yuan hubs. DBS's settlement flows through the CIPS clearing system grew 30% year-on-year in 2024, Han said, though he maintained that the shift toward more yuan-denominated settlements remains gradual. In a wide-ranging interview, Han spoke of how businesses are dealing with the uncertainty over Trump's tariffs and outlined DBS's growth strategy in the current economic environment. "One of the things that we have been growing this year is we have been growing our capability for FI clearing," he said. "We have been quite purposeful in terms of investment that we have made in the clearing capabilities." The bank is also looking to capitalise on its institutional banking business to drive its return on equity, which currently stands at 17%, Han said. Last week, DBS posted a quarterly profit that beat estimates, sending its shares to a record high. "By being able to work with the customers holistically, not just with lending, but also with advisory and as well as cash management, enables us to not only just look at lending or (net interest income) as a source of revenue, but really growing our fee-based revenues," Han said. - Reuters
The Diplomat
22-07-2025
- Business
- The Diplomat
Who Will Rule Crypto? The China-US Battle for Global Financial Leadership
The digital currency race between the U.S. and China is more than a technological arms race. It represents the reordering of global monetary governance. In 2025, China and the United States are deepening their rivalry in a new arena: digital currency infrastructure. In May, Hong Kong passed landmark legislation to regulate fiat-referenced stablecoins, underscoring its ambition to become a digital finance hub and align with Beijing's broader strategy to promote the digital yuan (e-CNY) as an alternative to the U.S. dollar. Meanwhile, U.S. policymakers and fintech firms are ramping up efforts to expand the reach of dollar-backed stablecoins, reflecting a growing competition over who sets the rules of the emerging digital monetary order. China's Push for a Multipolar Currency System China has been actively promoting the e-CNY, with the People's Bank of China (PBOC) announcing plans to establish an international operation center for the digital yuan in Shanghai. This initiative aims to enhance the global presence of the e-CNY and reduce reliance on the U.S. dollar in international trade. The PBOC aims to integrate the e-CNY into supply chain financing and cross-border payments – particularly between mainland China and Hong Kong – where projected usage is expected to reach $8 billion in 2025. Yet, analysts at J.P. Morgan maintain that the e-CNY is unlikely to erode the U.S. dollar's dominance in global transactions, and the data tells a clear story. In 2022, the U.S. dollar accounted for 88 percent of global FX transactions, 70 percent of foreign currency debt issuance, and 48 percent of cross-border liabilities, while the Chinese yuan made up just 7 percent of FX turnover. However, the e-CNY's role in facilitating trade within the BRICS bloc and other emerging markets could gradually erode the dollar's influence in specific regions. At the 2025 BRICS summit in Rio de Janeiro, leaders reaffirmed their commitment to de-dollarization, calling for alternative payment systems and criticizing unilateral dollar-based trade measures. The bloc has condemned unilateral tariffs, viewing them as harmful to global economic stability. BRICS is actively exploring alternative payment systems, a strategy reflected in several concrete mechanisms. The New Development Bank has issued more than $2.1 billion in local currency loans to finance infrastructure and sustainable projects, reducing reliance on dollar funding, while the $100 billion Contingent Reserve Arrangement provides member countries with liquidity support in currencies other than the dollar, enhancing financial resilience. Complementing this shift, China's Cross-Border Interbank Payment System (CIPS) has expanded significantly, facilitating yuan-denominated trade settlements and interoperating with Russia's SPFS system, thereby enabling some nations to circumvent the dollar-based SWIFT network. Trade data reinforces this trend: in 2024, China-Russia bilateral trade reached $218 billion, with a growing share settled in yuan and rubles, while India-Russia trade totaled $66 billion, much of it bypassing the dollar through local currency arrangements. U.S. Stablecoins: Regulatory Clarity and Global Reach In response to the rising importance of digital currencies, the U.S. Senate passed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) on June 17, by a bipartisan vote of 68-30, marking the first federal legal framework for payment stablecoins. This landmark legislation mandates that issuers fully back stablecoins with liquid assets, register with regulators, and meet transparency and audit requirements. Its passage is widely seen as solidifying the U.S. dollar's dominance in the digital payments domain by ensuring regulated access to dollar-pegged stablecoins. Meanwhile, Circle – the issuer of USDC, a stablecoin pegged to the U.S. dollar – is expanding globally. According to its 2025 State of the USDC Economy report, USDC circulation surged 78 percent year-over-year, surpassing $60 billion in active supply by early 2025, while total lifetime transactions exceeded $20 trillion, with a record $1 trillion in monthly volume in November 2024. USDC is now accessible to over 500 million users through more than 180 countries, supported by a growing network of global banking partnerships and cross-chain transfer protocols that facilitated over $20 billion in transfers across blockchains. In a notable move, Ant International, the overseas arm of Jack Ma-backed Ant Group, is preparing to integrate USDC into its AntChain platform once the token meets U.S. regulatory standards under the GENIUS Act. That integration would connect USDC to Alipay's massive 1 billion-plus user base and unlock new cross-border transaction capacity for regulated digital dollars. This rapid growth – with regulatory clarity following the GENIUS Act – positions USDC as a powerful means of reinforcing the U.S. dollar's digital supremacy across borders and industries. Its rising adoption among institutions and interoperability with platforms like Alipay and AntChain signal a convergence of U.S. stablecoin infrastructure with Chinese fintech reach, underpinning the dollar's competitive edge in the emerging digital economy. Implications for Global Finance The escalating digital currency rivalry between the United States and China underscores a strategic contest for influence over the future of global finance. While China's promotion of the e-CNY aims to establish a multipolar currency system, the U.S. is leveraging stablecoins to reinforce the dollar's dominance in digital transactions. This competition contributes to a fragmented global monetary landscape, where multiple digital currencies coexist, each backed by different geopolitical blocs. Such fragmentation may increase transaction costs and complicate international trade; however, it also reflects the evolving nature of global economic power structures. Recent data illustrates this shifting landscape. The U.S. dollar's share of global foreign exchange reserves declined from over 70 percent in the early 2000s to approximately 59 percent by the end of 2021, according to IMF COFER data, as countries – particularly within the BRICS bloc – pursue reserve diversification strategies. For example, central banks in emerging markets purchased over 244 metric tons of gold in the first quarter of 2025 alone, the highest quarterly volume in recent years, signaling a concerted effort to hedge against dollar dependence and enhance resilience against geopolitical and monetary shocks. These reserve shifts point to deeper structural changes in global finance. Institutions like the IMF have cautioned that the payment efficiency gains of digital money may be 'offset by financial safety-net challenges under stress,' especially in a world of diverging digital currency regimes. As the IMF warned in a 2024 policy note, 'a shift to a multipolar reserve configuration may require global reserve issuers to expand liquidity backstops' – underscoring how digital fragmentation could undermine the very stability such technologies aim to enhance. S. Yash Kalash from the Center for International Governance Innovation similarly warned that diverging digital financial infrastructures could foster 'fragmentation, capital flow volatility, and regulatory disjunctures,' particularly as countries build alliances around competing monetary technologies. Empirical research supports this trend. A 2025 study by Antonis Ballis found that rising exposure to sanctions and declining trust in Western payment networks are accelerating adoption of systems like CIPS and bilateral central bank digital currency rails, reinforcing 'digital fragmentation along geopolitical lines.' The study highlights that such networks are increasingly used not just for efficiency, but as hedges against dollar-denominated risk. Echoing this, economist Kenneth Rogoff, Harvard professor and former chief economist of the IMF, sees today as the most significant inflection point in the global currency system since the end of the gold standard. He emphasized that, while the U.S. dollar is likely to lose market share – primarily to the yuan and to a lesser extent the euro – cryptocurrencies are already chipping away at the dollar's underground economy dominance. This shift has been unfolding for over a decade due to the yuan's increased flexibility and China's development of alternative settlement systems. These trends have been accelerated by the Trump administration's policies. Rogoff suggested in an interview with Financial Times that the dollar will likely remain dominant in the short term but will face increasing challenges as the global monetary order evolves. This transition is not without cost. For financial institutions, rising fragmentation may increase settlement frictions, heighten currency risk, and complicate regulatory compliance across jurisdictions. For emerging markets, it presents a dual-edged dynamic: the opportunity to bypass dollar-dominated chokepoints, but also the risk of entrenching new dependencies – this time on regional digital infrastructure and dominant tech-finance platforms. Global financial governance institutions such as the IMF have consistently warned that the uncoordinated proliferation of digital currencies could exacerbate liquidity mismatches and undermine systemic stability during times of geopolitical stress. Ultimately, the digital currency race between the U.S. and China is more than a technological arms race – it represents the reordering of global monetary governance. As competing infrastructures harden into geopolitical blocs, the future of cross-border finance will likely be shaped not just by efficiency or innovation, but by which networks the world's economies choose to trust. In this emerging era, the politics of interoperability, access, and sovereignty will define the contours of global finance more than ever before.
The Diplomat
03-07-2025
- Business
- The Diplomat
China's Accelerating Efforts to Internationalize the Renminbi
In recent weeks, a cluster of news reports and commentary has drawn attention to China's accelerating efforts to internationalize the renminbi (RMB). At the Lujiazui Forum in Shanghai, The New York Times reported that People's Bank of China governor Pan Gongsheng delivered a pointed critique of global dependence on a single national currency, warning that financial risks stemming from the dominant issuer could spill over internationally and trigger crises. Without naming the United States, Pan called for a more diversified global monetary system and promoted China's digital RMB as part of the solution. According to this framing, China's current push to expand the RMB's global role is a strategic response to the vulnerabilities of dollar dependence, rather than a direct challenge to dollar hegemony. In the Financial Times, economist Gerard Lyons argued that Beijing should consider allowing a gradual appreciation of the RMB to support its international ambitions. Meanwhile, The Straits Times reported that Chinese authorities have launched a sweeping campaign to elevate the currency's role in global finance, including the expansion of China's Cross-Border Interbank Payment System (CIPS) to offshore RMB centers in Africa, the Middle East, and Central Asia, and plans to establish a digital RMB international operations center in Shanghai. This renewed focus on the global role of RMB – by both Beijing and international observers – is propelled by rising geopolitical volatility and waning confidence in U.S. monetary stewardship. These shifting conditions have not altered the direction of policy, but have reinforced and accelerated Beijing's broader, long-term strategy to reduce its reliance on the dollar and institutionalize an alternative ecosystem of trade, payments, and finance – one designed to operate alongside, rather than displace, the dominant dollar-based order. Beijing's goal is to carve out strategic space for the RMB within an increasingly fractured global system. In this emerging configuration, the RMB assumes a more prominent, though still bounded, role. A State-led Strategy of Internationalization While China is attempting to seize a strategic opening to accelerate the internationalization of the RMB, it is important to note that Beijing is not pursuing a zero-sum game against the greenback. The more revealing metric is not whether the RMB overtakes the dollar, but how successfully China is building functional alternatives, particularly in trade, finance, energy, infrastructure, and digital payments, that reduce its systemic exposure to dollar-based risks. Judging RMB progress solely by global reserve status or through the lens of dollar hegemony obscures the pragmatic, domain-specific architecture now taking shape. Since the late 2000s, Beijing has pursued a cautious, state-managed campaign to expand the RMB's role in global trade and finance. These efforts gained traction in the aftermath of the 2008 Global Financial Crisis and again during the China-U.S. trade war. Key milestones include the establishment of CIPS, the introduction of yuan-denominated oil futures ('petroyuan'), and the inclusion of the RMB in the International Monetary Fund's Special Drawing Rights basket. However, China's RMB internationalization strategy is not a direct progression toward achieving significant global reserve currency status (currently the RMB accounts for only 2-3 percent of global reserves), as this would entail extensive financial liberalization. China has avoided liberalizing its capital account or floating its exchange rate. RMB internationalization remained a means to an end – a way to hedge against geopolitical risk and strengthen China's global economic position without exposing itself to the volatility of open financial markets. What has changed in 2025 is not China's strategy per se, but the context in which it operates. With U.S. economic policy increasingly erratic, and dollar-based systems increasingly seen as instruments of geopolitical coercion – frequently deployed to sanction adversaries – Beijing perceives a window of opportunity. Recent developments – including new cross-border infrastructure, digital currency pilots, and offshore RMB market instruments – signal a potential turning point. Together, these measures lay the groundwork for broader RMB adoption by strengthening the institutional infrastructure underpinning its international use. At the same time, some observers have suggested that currency appreciation would be a more direct route to enhancing the RMB's credibility and global uptake. Lyons argued that a stronger RMB, supported by domestic policy reforms, could help anchor China's long-term ambitions for a more prominent international role. But such a move would risk undermining export competitiveness and exacerbating deflationary pressures at home, potentially harming economic growth. Rather than pursuing exchange-rate adjustments to boost the RMB's global standing, Beijing continues to prioritize institutional mechanisms that preserve domestic stability and policy autonomy. Selective Integration Over Liberalization A key feature of China's approach is its continued refusal to pursue full capital account liberalization. While some incremental easing of capital controls has occurred in recent years – notably through expanded investment quotas and a broader array of offshore RMB product offerings – the underlying architecture remains tightly managed. Instead of opening up, Beijing is cultivating a system of selective internationalization: integrating into global financial markets on its own terms, in a way that preserves domestic stability and control. Hong Kong remains the linchpin of this strategy. Its semi-autonomous status under the 'one country, two systems' framework allows for controlled experimentation in cross-border financial innovation. The city's introduction of RMB-denominated stock trading counters and its growing role in digital e-CNY ('digital yuan') initiatives that enhance connectivity between the mainland and international payments infrastructure underscore its centrality. Yet even here, China is carefully calibrating exposure to risk. This strategy reflects a broader understanding of global economic fragmentation. Rather than chasing global dominance, China is building a network of bilateral and regional arrangements that reduce dependence on dollar-based systems. From the Belt and Road Initiative to BRICS+ and currency swaps, China is embedding the RMB in a growing network of cross-border arrangements – facilitating trade and investment while maintaining control over capital flows. Building Systemic Resilience The unifying logic to this evolving strategy is building systemic resilience. For China, being able to settle critical transactions in its own currency is not just economically advantageous, but strategically necessary. As the global economic order becomes more contested and less rules-based, the ability to operate outside Western-controlled systems becomes a matter of national security. This logic also appeals to China's partners. In a world of growing financial polarization, the RMB is gaining traction not because it offers a superior alternative to the dollar, but because it offers a means of reducing exposure to U.S. policy volatility. For countries under financial sanctions, or those wary of dollar dependence, access to RMB-denominated channels offers a vital hedge. While China has been pursuing trade-based RMB internationalization – using bilateral settlements, currency swap agreements, energy transactions, and strategic partnerships to reduce reliance on the dollar without liberalizing its capital account – recent developments mark a turn toward financial market infrastructure. This shift reflects a strategy to embed the RMB more deeply in the global financial system, not merely as a medium for trade, but as part of a broader institutional architecture. Among the key measures are the establishment of a digital RMB international operations center in Shanghai, designed to promote cross-border adoption of China's central bank digital currency by streamlining transactions and reducing dependence on dollar-based systems. The rollout of a fast payment system linking Hong Kong and the mainland facilitates real-time RMB transfers for trade and services, increasing usability in cross-border commerce. In May 2025, the Shanghai Futures Exchange proposed opening domestic currency futures to overseas investors and brokers, offering onshore tools to hedge RMB exposure and supporting further financial liberalization. Meanwhile, the expansion of CIPS to offshore centers in Africa, the Middle East, and Central Asia reinforces China's push to build an alternative to SWIFT and extend the RMB's reach across emerging financial corridors in the Global South. In June 2025, CIPS also launched a pilot service for processing international letters of credit, expanding its functionality in trade finance and further reducing reliance on Western-dominated financial intermediaries. Taken together, these initiatives point to a more finance-oriented phase of RMB internationalization – less about transactional trade flows, and more about embedding the RMB in the architecture of a parallel monetary order. Toward a Multipolar Currency Order What we are witnessing in 2025 is not a radical challenge to the prevailing currency system, but the construction of a parallel one – intended not to displace the dollar, but to reduce exposure to it. China is leveraging global uncertainty to accelerate a model of selective internationalization it has long been developing. This model does not aim to overturn the existing monetary order, but to insulate China and its partners from its volatility and to expand China's influence in targeted domains. It does not seek to replace one global financial hegemon with another, but to mitigate the risks of reliance on the existing one. Rather, RMB internationalization is incremental but accelerating – a recalibration of risk, reach, and the rules of global finance. This work has received funding from the European Union's Horizon Europe coordination and support action 101079069 — EUVIP — HORIZON-WIDERA-2021-ACCESS-03. Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the granting authority can be held responsible for them.
Business Times
27-06-2025
- Business
- Business Times
Gold glitters as mistrust spreads
A DECADE ago, I asked officials at the New York Federal Reserve if I could peek at their gold reserves. They refused point blank. The reason? Fed officials have long taken pride in having the world's biggest gold vault, dug 80 feet down into Manhattan's bedrock. But they prefer to keep it discreet, partly because many of the vault's 507,000 bars belong to countries such as Germany and Italy. Silence was literally golden. Now, however, a discordant note has been sounded. In recent weeks, politicians in Germany and Italy have demanded the repatriation of their gold bars, worth an estimated US$245 billion. So have others. 'We are very concerned about (US President Donald) Trump tampering with the Federal Reserve Bank's independence,' explains the Taxpayers Association of Europe. Neither the Fed nor European governments seem minded to act, and there are no signs of bullion moving east. On the contrary, gold has flooded into, not out of, America since Trump's election, prompting speculation that US government agencies, like private investors, might be stockpiling it (although there is no public proof of that). Either way, what is indisputable is that these repatriation appeals are a sign of spreading mistrust. The reason those bars were placed in New York vaults in the first place is that America's allies have hitherto assumed that Washington was a responsible leader of the west – and the dollar-based finance system. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Now, however, figures in the Trump team – including Stephen Miran, chair of the Council of Economic Advisers, and Scott Bessent, Treasury secretary – are chafing against the 'cost' of this system. Thus, the question that investors need to ask is what other countries might do if trade wars spawn capital battles as well. In Asia, this debate is already under way, as investors look for diversification. One sign is surging gold purchases. Another is that recent unusual price movements in Hong Kong markets suggest a reluctance to buy dollar assets. Meanwhile, Chinese officials are hailing the rising use of the renminbi in trade invoicing, and developing a Cross-Border Interbank Payment System (Cips) to challenge the US-controlled Swift interbank payments system. Investors also need to watch the so-called mBridge initiative, a cross-border central bank digital currency project launched in 2023 by the Bank for International Settlements (BIS). Last year, Washington forced the BIS to withdraw from this, leaving China in control. I suspect this is an own goal by the US. Europe, by contrast, has been fairly passive thus far. However, figures like François Heisbourg, a key European adviser, are urging preparation for a 'post-American Europe'. And while this has already sparked pledges of higher military spending, the focus is now also shifting to 'geoeconomics', or the idea that statecraft must drive industrial policy. However, analysts such as Elmar Hellendoorn, at the Atlantic Council, want to go further, with a policy of 'geofinance' too. After all, he argues, Europe is vulnerable since it not only relies on dollar finance, but is also buffeted by speculative capital flows, due to financialisation of its economy. Thus, 'large parts of the European economy are now under the strong influence, if not the direct control, of Wall Street firms, which are ultimately subject to US laws and Washington's financial statecraft', he frets. Indeed, Enrico Letta, the former Italian prime minister, fears that Europe is becoming a 'financial colony' of the US. Can this change? The European Commission is taking baby steps in that direction, by accelerating efforts to create a single European capital market. Central banks across Europe are also developing cross-border digital currencies, and the European Central Bank (ECB) itself is building a digital euro. That sets up a fascinating policy contest with Washington, which is embracing dollar-based stablecoins instead – partly because Bessent thinks this will create trillions of dollars of new demand for Treasuries. However, these efforts still seem far too timid to actually create a 'global euro moment', to quote ECB president Christine Lagarde. And that seems unlikely to change unless a crisis hits, be that a loss of market confidence in the dollar (perhaps due to fiscal jitters) or extreme aggression by the US towards Europe. Hence, why those Manhattan gold vaults matter: if such crises do ever materialise, it is easy to imagine a scenario in which American leaders (at best) will insist on using that bullion as collateral for dollar swaps or (at worst) as a tool for political coercion. Germany's Bundesbank, for its part, discounts that risk – in public at least. 'We have no doubt that the New York Fed is a trustworthy and reliable partner for the safekeeping of our gold reserves,' it tells the FT. Almost certainly so. But the debate shows that once unimaginable scenarios are at least being imagined. Reclaiming gold is a rational move. FINANCIAL TIMES
