CCTV-NEWS：赵克锋：CIPS DEBUT

    采访视频链接: http://english.cntv.cn/2015/10/08/VIDE1444297202447450.shtml

1. How much of a jump in global yuan usage will we see as a result of the CIPS systems?

Only little benchmarks available but we could make some educated guess of its limits.
The RMB has become the world’s fourth largest payment currency by trade volume in August but it only accounts for 3% of global payment markets. The daily RMB trading volume is more than one hundred billion and now 30% of China’s global trade. The corresponding volume in the States is over one trillion daily. There is a huge room that the RMB could catch up.

2.Was the launch scaled back? There are reports that the initial plan was to cover capital related transactions as well?

There was indeed some expectation that the CIPS would not just be primarily for trade transactions but capital transactions.  But the CIPS is not excluding capital transactions in the future. I believe it sets up very good ground work for future capital transactions. But the government remains very cautious about capital transactions especially of the roller-coaster episodes of China’s stock market this year.

The bottom line is CIPS helps RMB cross-border clearing and settlements to be done faster, cheaper, and at a higher success rate.

3. To what extent will CIPS rival the likes of SWIFT in the future?  

It is positively related to the progress of RMB’s internationalization.  

Before, international settlement was not fast before because settlement had to go through offshore settlement banks such as those in Hong Kong, or else with the help of a correspondent bank in Mainland China.
It was not cheap before because more intermediaries implies more fees.
It was not necessary successfully done before because of different language and coding formats between the local system CNAPS and the international systems SWIFT.

With CIPS, 19 domestic and foreign banks in China are now direct participants, and hundreds of foreign banks worldwide are indirect participants. With so many international participants, so not only that CIPS reduces the transaction costs in trade, it also removes a key hurdle for the internationalization of RMB. Common requirements of a currency being international include the following: a good international settlement system, large international trade volume, stable policies and government support, good economy with low inflation. We have met the above now. But the market seems to not only expect CIPS to do things faster and cheaper but allow them to do more such as securities purchase. Though the CIPS surely will help RMB to be included in IMF as its special drawing rights basket of reserve currencies in 2016.