China has moved forward and released a global payment system through its Central Bank, which will provide cross-border transactions in yuan. The China International Payment System (CIPS) plans on internationalizing the yuan and challenging the dominance of the US dollar. Many have been suspecting that China would unveil some new form of a gold-backed currency for many years now, with a growing number speculating that it was China's eventual intention to compete with the US dollar.
“The establishment of CIPS is an important milestone in yuan internationalization, providing the infrastructure that will connect global yuan users through one single system,” Helen Wong, greater China chief executive at HSBC
The new system is going to be open for operations at least 11 hours per day and it will facilitate payments in cross-border trade, financing and personal remittances, and direct investments. At least nineteen different banks so far have been authorized to use the CIPS, and eight of them are Chinese subsidiaries of foreign banks. So far those included in the arrangement involve Citi, HSBC, ANZ, and Deutsche Bank. The new system is expected to reduce the overall cost and time for money transfers.
China is clearly moving to establish inclusion of the yuan within the International Monetary Fund currency basket. Their currency has now become the fourth most used currency in international payments, and this new system will only help to boost their presence on the market and international stage. China is clearly determined to decrease their own dependence on the U.S. dollar, and it's a move which some suspect many others will begin making as well within the near future. At present, the IMF calculates that China's $11.2 trillion economy is second only to the United States, even though the IMF has repeatedly let it be known that the yuan doesn't qualify the criteria for a reserve currency. By the looks of their progress thus far, the IMF might be prompted to reconsider their position in the not-so-distant future.
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