Cross-Border Interbank Payment System

The Cross-Border Interbank Payment System (CIPS) is a financial-market infrastructure that provides clearing and settlement services for cross-border renminbi (RMB) payments.

CIPS was established in China to facilitate international RMB transactions and to provide participating financial institutions with standardized cross-border payment and settlement services.

A simplified representation is:

$\mathrm{C}\mathrm{r}\mathrm{o}\mathrm{s}\mathrm{s}\mathrm{-}\mathrm{B}\mathrm{o}\mathrm{r}\mathrm{d}\mathrm{e}\mathrm{r}\mathrm{P}\mathrm{a}\mathrm{y}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\to \mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}\to \mathrm{C}\mathrm{l}\mathrm{e}\mathrm{a}\mathrm{r}\mathrm{i}\mathrm{n}\mathrm{g}\mathrm{a}\mathrm{n}\mathrm{d}\mathrm{S}\mathrm{e}\mathrm{t}\mathrm{t}\mathrm{l}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\to \mathrm{R}\mathrm{e}\mathrm{c}\mathrm{i}\mathrm{p}\mathrm{i}\mathrm{e}\mathrm{n}\mathrm{t}$

Purpose

CIPS supports the international use of the renminbi by providing infrastructure for cross-border RMB payments.

Its functions include:

• processing cross-border RMB payments;
• providing clearing and settlement services;
• connecting participating financial institutions;
• supporting standardized payment messaging and processing;
• facilitating international RMB transactions.

A simplified relationship is:

$\mathrm{I}\mathrm{n}\mathrm{t}\mathrm{e}\mathrm{r}\mathrm{n}\mathrm{a}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\mathrm{a}\mathrm{l}\mathrm{R}\mathrm{M}\mathrm{B}\mathrm{T}\mathrm{r}\mathrm{a}\mathrm{n}\mathrm{s}\mathrm{a}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\to \mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}\to \mathrm{P}\mathrm{a}\mathrm{y}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{P}\mathrm{r}\mathrm{o}\mathrm{c}\mathrm{e}\mathrm{s}\mathrm{s}\mathrm{i}\mathrm{n}\mathrm{g}\to \mathrm{S}\mathrm{e}\mathrm{t}\mathrm{t}\mathrm{l}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}$

Establishment

CIPS was developed by the People's Bank of China as part of efforts to improve China's cross-border RMB payment infrastructure.

The system began operations in 2015.

Its development formed part of the broader internationalization of the renminbi and the development of China's financial-market infrastructure.

A simplified progression is:

$\mathrm{R}\mathrm{M}\mathrm{B}\mathrm{I}\mathrm{n}\mathrm{t}\mathrm{e}\mathrm{r}\mathrm{n}\mathrm{a}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\mathrm{a}\mathrm{l}\mathrm{i}\mathrm{z}\mathrm{a}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\to \mathrm{C}\mathrm{r}\mathrm{o}\mathrm{s}\mathrm{s}\mathrm{-}\mathrm{B}\mathrm{o}\mathrm{r}\mathrm{d}\mathrm{e}\mathrm{r}\mathrm{P}\mathrm{a}\mathrm{y}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{I}\mathrm{n}\mathrm{f}\mathrm{r}\mathrm{a}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{u}\mathrm{r}\mathrm{e}\to \mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}$

Participants

CIPS connects participating banks and other eligible financial institutions involved in cross-border RMB transactions.

Participants can access the system either directly or through arrangements involving other participating institutions, depending on the applicable participation framework.

A simplified structure is:

$\mathrm{B}\mathrm{a}\mathrm{n}\mathrm{k}\mathrm{A}\to \mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}\to \mathrm{B}\mathrm{a}\mathrm{n}\mathrm{k}\mathrm{B}$

The network can connect institutions in China with financial institutions operating in other jurisdictions.

Payment processing

CIPS processes payment instructions associated with cross-border RMB transactions.

A simplified payment sequence is:

$\mathrm{P}\mathrm{a}\mathrm{y}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{I}\mathrm{n}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\to \mathrm{V}\mathrm{e}\mathrm{r}\mathrm{i}\mathrm{f}\mathrm{i}\mathrm{c}\mathrm{a}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\to \mathrm{C}\mathrm{l}\mathrm{e}\mathrm{a}\mathrm{r}\mathrm{i}\mathrm{n}\mathrm{g}\to \mathrm{S}\mathrm{e}\mathrm{t}\mathrm{t}\mathrm{l}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}$

The precise processing sequence depends on the type of transaction and the relevant institutional arrangements.

Renminbi internationalization

CIPS forms part of China's infrastructure for supporting the international use of the renminbi.

International RMB use can involve:

• trade settlement;
• cross-border investment;
• financial-market transactions;
• international lending;
• other cross-border financial activities.

A simplified relationship is:

$\mathrm{I}\mathrm{n}\mathrm{t}\mathrm{e}\mathrm{r}\mathrm{n}\mathrm{a}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\mathrm{a}\mathrm{l}\mathrm{R}\mathrm{M}\mathrm{B}\mathrm{U}\mathrm{s}\mathrm{e}\to \mathrm{C}\mathrm{r}\mathrm{o}\mathrm{s}\mathrm{s}\mathrm{-}\mathrm{B}\mathrm{o}\mathrm{r}\mathrm{d}\mathrm{e}\mathrm{r}\mathrm{P}\mathrm{a}\mathrm{y}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{D}\mathrm{e}\mathrm{m}\mathrm{a}\mathrm{n}\mathrm{d}\to \mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}\to \mathrm{R}\mathrm{M}\mathrm{B}\mathrm{S}\mathrm{e}\mathrm{t}\mathrm{t}\mathrm{l}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}$

CIPS does not itself determine the international value or exchange rate of the renminbi.

Relationship with SWIFT

CIPS and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) perform different functions.

CIPS is a payment and settlement infrastructure for cross-border RMB transactions, whereas SWIFT primarily provides a standardized financial messaging network used by financial institutions to exchange payment and other financial messages.

A simplified distinction is:

$\mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}\to \mathrm{P}\mathrm{a}\mathrm{y}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{a}\mathrm{n}\mathrm{d}\mathrm{S}\mathrm{e}\mathrm{t}\mathrm{t}\mathrm{l}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{I}\mathrm{n}\mathrm{f}\mathrm{r}\mathrm{a}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{u}\mathrm{r}\mathrm{e}$

$\mathrm{S}\mathrm{W}\mathrm{I}\mathrm{F}\mathrm{T}\to \mathrm{F}\mathrm{i}\mathrm{n}\mathrm{a}\mathrm{n}\mathrm{c}\mathrm{i}\mathrm{a}\mathrm{l}\mathrm{M}\mathrm{e}\mathrm{s}\mathrm{s}\mathrm{a}\mathrm{g}\mathrm{i}\mathrm{n}\mathrm{g}\mathrm{I}\mathrm{n}\mathrm{f}\mathrm{r}\mathrm{a}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{u}\mathrm{r}\mathrm{e}$

The two systems can interact, and participation in CIPS does not necessarily eliminate the use of SWIFT messaging.

Financial infrastructure

CIPS is part of China's broader financial-market infrastructure.

Its operation involves participating financial institutions, payment systems, financial messaging, clearing arrangements, and settlement processes.

A simplified representation is:

$\mathrm{F}\mathrm{i}\mathrm{n}\mathrm{a}\mathrm{n}\mathrm{c}\mathrm{i}\mathrm{a}\mathrm{l}\mathrm{I}\mathrm{n}\mathrm{s}\mathrm{t}\mathrm{i}\mathrm{t}\mathrm{u}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\to \mathrm{P}\mathrm{a}\mathrm{y}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{I}\mathrm{n}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\to \mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}\to \mathrm{S}\mathrm{e}\mathrm{t}\mathrm{t}\mathrm{l}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}$

The system operates within the regulatory and institutional framework established by Chinese financial authorities.

International role

CIPS has expanded the infrastructure available for cross-border RMB transactions as the international use of the currency has increased.

Its international network can facilitate RMB payments involving institutions in multiple jurisdictions.

A simplified relationship is:

$\mathrm{G}\mathrm{l}\mathrm{o}\mathrm{b}\mathrm{a}\mathrm{l}\mathrm{R}\mathrm{M}\mathrm{B}\mathrm{T}\mathrm{r}\mathrm{a}\mathrm{n}\mathrm{s}\mathrm{a}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\mathrm{s}\to \mathrm{C}\mathrm{I}\mathrm{P}\mathrm{S}\mathrm{N}\mathrm{e}\mathrm{t}\mathrm{w}\mathrm{o}\mathrm{r}\mathrm{k}\to \mathrm{C}\mathrm{r}\mathrm{o}\mathrm{s}\mathrm{s}\mathrm{-}\mathrm{B}\mathrm{o}\mathrm{r}\mathrm{d}\mathrm{e}\mathrm{r}\mathrm{S}\mathrm{e}\mathrm{t}\mathrm{t}\mathrm{l}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}$

The international role of CIPS is therefore closely associated with the development of the renminbi as an international payment and settlement currency.

See also

• Renminbi
• People's Bank of China
• Society for Worldwide Interbank Financial Telecommunication
• Cross-border payment
• Interbank network
• Payment system
• Clearing (finance)
• Settlement (finance)
• Internationalization of the renminbi