China rolls out plan to promote its own payment system as US trade war simmers

China has released an action plan to promote the use of the yuan and its own payment system in international trade, as it seeks to reduce its dependence on the dollar amid an escalating trade war with the United States.

The plan – jointly released by the Shanghai municipal government, the People’s Bank of China and the country’s financial regulators on Monday – aims to leverage Shanghai’s role as a global financial hub to promote the use of the Chinese currency, especially in trade involving countries in the Global South.

Shanghai will “enhance the functionality” of the Cross-Border Interbank Payment System (CIPS) – China’s alternative to the Society for Worldwide Interbank Financial Telecommunication (Swift) payment system – and continue expanding the global coverage of the CIPS network, according to the policy.

It will also strengthen financial support for Chinese enterprises “going global” and advance the Belt and Road Initiative, while “enabling all types of market players to engage in international competition and cooperation in a safer, more convenient and efficient manner”, according to an official statement.

Settling more transactions using China’s own currency and payment system would enable Beijing to strengthen its position in global trade networks and reduce the harm caused by any potential US move to curtail its access to the dollar-based financial system.

South China Morning Post