July 8, 2014 / 9:08 PM / 5 years ago

Factbox: Development of China's yuan payment systems

(Reuters) - As part of its efforts to turn yuan CNY=CFXS into a global currency, China is building a superhighway for worldwide renminbi payments. Below are key facts and a timeline concerning development of China's yuan (renminbi) payments system.

In mainland China, domestic yuan payments are cleared via the China National Advanced Payment Systems (CNAPS), which is run by the central bank and provides real-time gross settlement services. To have direct access to CNAPS, a bank must have a settlement account at a branch of China’s central bank.

All clearing banks in the various offshore yuan centers automatically have access to this system.

In  April 2012,  the central bank said it would launch a new payments system called China International Payment System (CIPS), which would be available within two years for cross-border yuan settlement, modeled on the U.S. CHIPS network.  

The launch of this system may now be delayed, according to market sources.

NOVEMBER 2005 - China’s central bank announces the expansion of the yuan banking business in Hong Kong. Hong Kong Interbank Clearing Limited forms a partnership with the Hong Kong unit of Bank of China (601988.SS), the city’s clearing bank for yuan trades, to develop the Renminbi Settlement System that was launched in March 2006. The system offers yuan check clearing services and real-time yuan payment services.

2007 - China’s central bank says the clearing arrangement will be expanded to include a new category of yuan business in Hong Kong. Mainland-based financial institutions can now issue yuan-denominated bonds in Hong Kong.

JULY 2010 - China’s central bank and the Hong Kong Monetary Authority sign an agreement that lays the groundwork for the development of the offshore renminbi market. A wide array of yuan financial products can now be offered in the city and clearing services are also greatly enhanced.

JUNE 2012 - The operating hours of the renminbi real-time gross settlement system in Hong Kong are extended to 15 hours from 10 hours a day to meet rising demand for payments and settlements.

AUGUST 2012 - China and Taiwan sign an agreement to develop a yuan and Taiwan dollar TWD= clearing system. The Taipei branch of Bank of China is designated as the clearing bank in Taiwan in December.

FEBRUARY 2013 - China’s central bank appoints the Singapore branch of the Industrial and Commercial Bank of China Ltd (601398.SS) (1398.HK) as the yuan clearing bank in Singapore. Yuan deposits in Singapore swell to 200 billion yuan ($32.3 billion) by December, helped by regulations that allowed multinational companies operating in China to store excess yuan holdings offshore.

2013 - Because of its first-mover advantage, Hong Kong leads the way in market infrastructure for international yuan payments. The yuan real-time gross settlement services system in Hong Kong processes an average of over 400 billion yuan ($64.5 billion) worth of transactions a day, an 86 percent increase over 2012 following a 90 percent rise in that year.

2014 - Beijing simplifies rules to allow some companies to move their yuan out of China to other regional treasury centers overseas. The transfers are done under a program called the “RMB-denominated cross-border sweeping facility”.

JUNE 2014 - China Construction Bank (601939.SS), the country’s second-biggest lender, is appointed the clearing bank for yuan trades in London. China designates Bank of China as the clearing bank in Frankfurt days later. Central banks in France and Luxembourg sign agreement with their Chinese counterpart that will eventually lead to the designation of yuan clearing banks in their countries.

JULY 2014 - China and South Korea agree to set up a yuan clearing system in South Korea as Chinese President Xi Jinping visits Seoul.

Sources: Reuters, Hong Kong Clearing, JP Morgan, Monetary Authority of Singapore, ASIFMA

($1 = 6.2012 Chinese Yuan Renminbi)

Reporting by Saikat Chatterjee; Editing by Tomasz Janowski

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