Currently, only PBoC-designated clearing banks can process international yuan payments. All of China’s 15 designated clearing banks are subsidiaries of large state-controlled banks. CIPS allows foreign banks to engage in processing of yuan payments through a direct connection between CIPS and the bank.
Clearing of payments in yuan at the national level is already done with the China National Payments System (CNAPS). CIPS apparently will operate in parallel with CNAPS. CNAPS will also be brought into compliance with international standards.
CIPS has been designed in accordance with SWIFT standards and supports both Chinese and English languages. CIPS can process yuan payments for such purposes as foreign trade or direct investment. As with many other reforms in China, the rollout will involve several phases. In the first phase, the central bank says the system will be available 11 hours a day to allow processing of payments to Asia, Europe and Oceania.
The international payments clearing system has been under construction since 2012. It was originally scheduled for kick-off last year, but the launch was delayed due to technical issues. CIPS represents another step by China towards full international acceptance of the yuan.