The first stage of the China International Payment System (CIPS) was officially launched Thursday in Shanghai, marking a milestone in the government's efforts to make the yuan a global currency.
The system, which provides capital settlement and clearing services for cross-border yuan transactions for financial institutions both locally and abroad, will improve efficiency and increase the use of the Chinese currency worldwide by cutting cost and processing times, Fan Yifei, vice president of the People's Bank of China, the country's central bank, told the state-owned Xinhua News Agency.
Previously, cross-border clearance of the yuan meant going through either an offshore clearing bank in places such as Hong Kong, Singapore and London, or getting help from a corresponding bank on mainland China.
CIPS will have a significant role to play in shoring up China's "real economy" and promoting "going abroad" strategy of local companies, Fan said.
Developed and managed by the central bank, CIPS enables market players outside China to clear yuan transactions with their Chinese counterparts directly from 9 a.m. to 8 p.m. Beijing time during business days under the coding format that is compliant with international standards, said Xinhua.
China's yuan became one of the world's top five payment currencies in Nov. 2014, overtaking the Canadian dollar and Australian dollar, according to data from global transaction service provider SWIFT.
In recent years, China has ramped up its efforts to turn the yuan into an international currency. In 2014, the central bank designated 10 official clearing banks for the yuan, bringing the total to 14 banking institutions worldwide authorized to clear yuan transactions with China.