China’s payment system spreads across Africa and Asia amid US trade war
China has signed up entities from Africa, Central Asia and the Gulf to its cross-border payment system, as it hedges against potential US sanctions
China’s cross-border yuan payment system has signed up more financial entities from Africa, Central Asia and the Middle East, as Beijing accelerates efforts to promote the global use of its currency amid rising tensions with the United States.
A group of six financial institutions officially joined the yuan-based Cross-border Interbank Payment System (CIPS) as direct participants during a ceremony in Shanghai on Wednesday, becoming the latest entities to sign up to China’s alternative to the Society for Worldwide Interbank Financial Telecommunication (Swift) system.
The newcomers include the African Export-Import Bank, First Abu Dhabi Bank, South Africa’s Standard Bank, Singapore’s United Overseas Bank, the Kyrgyzstan-based Eldik Bank, and Chongwa (Macau) Financial Asset Exchange, a state-owned asset trading platform from the special administrative region, according to state broadcaster CCTV.
The system had 174 direct participants as of the end of May, though most of them were made up of domestic and overseas branches of Chinese banks, as well as Chinese branches of global financial giants such as HSBC, JP Morgan and Citibank.
A direct participant refers to an entity that owns a CIPS account and can directly remit through the system, while indirect participants have to rely on others to complete transactions on their behalf.
A total of 175 trillion yuan (US$24.4 trillion) of transactions was made via the CIPS last year, an increase of 43 per cent year on year.
“As geopolitical tensions escalate, traditional cross-border payment infrastructure is prone to being politicised and weaponised as a unilateral sanction tool, undermining the international financial order,” said Pan Gongsheng, governor of the People’s Bank of China, at the Lujiazui Forum on Wednesday.
While Pan did not name a specific country during the speech, the remarks were likely aimed at Washington.
Chinese academics have long warned of the danger posed by US financial sanctions targeting China, citing the Russia case, and anxiety in Beijing jumped after US President Donald Trump raised tariffs on Chinese goods to unprecedented levels in April.
The US dollar remains a dominant currency in international payments, reserves and forex trading, Pan noted.
About 48.5 per cent of transactions conducted via the Swift payment system in May used dollars, compared with just 2.9 per cent for the yuan.
The yuan accounted for 2.18 per cent of global forex reserves as of the end of 2024, while the US dollar made up 57.8 per cent, according to data from the International Monetary Fund.
Pan called for a more efficient, secure, inclusive and diverse global payment system, saying a growing number of countries were turning to local currency transactions.
“The situation where a single currency dominates cross-border transactions is changing,” he said. “After more than a decade of development, China has preliminarily established a yuan cross-border payment network with multiple channels and wide coverage.”
In April, China’s central bank and the Shanghai municipal government announced a plan to boost the city’s cross-border finance sector, which included measures to expand the global coverage of the CIPS and potentially integrate blockchain technology into the system.