The launch of the China International Payment System (CIPS) will not be so attractive to Iran or other nations in the Middle East and Central Asia or even to Russia, economists told Trend in a commentary on March 11.
When CIPS comes, these countries will practically be overwhelmed by Beijing’s financial penetration economists contend.
China’s long-awaited international payment system – projected to be commenced in September – to process cross-border yuan transactions is ready and may be launched as early as September or October, sources told Reuters on March 9.
The new system will make international clearings in the yuan quicker, cheaper and safer, economists say.
“Since China has the world’s second largest economy in terms of GDP, and because the export of goods and services from China is over $2.4 trillion a year (2013 statistics), the need for such a system is obvious,” said one economist.
CIPS, which would be a worldwide payments superhighway for the yuan, will replace a patchwork of existing networks that make processing renminbi payments a more cumbersome process, Reuters reported.
Currently, cross-border yuan clearing has to be done either through one of the offshore yuan clearing banks in the likes of Hong Kong, Singapore and London, or else with the help of a correspondent bank in mainland China, Bloomberg reported.
CIPS will remove one of the biggest hurdles to internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.
Some economists believe the economy of China needs much fundamental change in order for the country to be able to continue its growth in the long run, though admitting that the launch of the system is a necessary step to that goal.
“But this system will not change much in regards to Iran and Iran-China relations,” an economist said.
Iran sells oil to China and has to import goods in return or store the money in banks there.
Due to western sanctions, Iran is cut away from the SWIFT global interbank network. Besides, sanctions have locked at least $100 billion of Iran’s oil revenues overseas.
Iran is negotiating with the US, Britain, France, Germany, China and Russia (the P5+1) to lift the sanctions – Imposed over Tehran’s nuclear energy program – in exchange for Iran limiting its nuclear activities.
Iran’s imports from China accounted for 24 percent of its total imports in terms of value in the 11 months to Feb. 20.
China’s exports to Iran witnessed an increase of 36.94 percent in value during the period, while the volume of the Islamic Republic’s imports from China registered a 24.58 percent rise year-on-year.
