PBoC and Swift to offer cross-border payments services

The People’s Bank of China announced that its joint venture with payments consortium Swift will start offering cross-border transaction services.

The Finance Gateway Information Services Company will set up a Chinese network for financial messaging services, the PBoC announced on March 23. The firm will also set up a localised data warehouse to monitor and analyse cross-border payment messaging.

Some small and medium-sized banks in China have experienced unstable connections to the Swift network, which affected cross-border business processing, the central bank said. Setting up a local network will give users a stable, resilient and secure connection to the Swift system without network interruptions.

The Finance Gateway Information Services Company was set up in mid-January, as a joint venture between Swift and the China National Clearing Centre, a PBoC subsidiary. Minority shareholders include China’s Cross-border Interbank Payment System (CIPS), the Payment & Clearing Association of China and the PBoC Digital Currency Research Institute.

Analysts regard it as unlikely that the US will impose financial sanctions to cut off Chinese banks’ access to the Swift system. Some Chinese banks have however argued that China should reduce its reliance on Swift to avoid potential sanctions.

China should continue to push for the internationalisation of the yuan, Zhou Jingtong, an economist with Bank of China, told Securities Times last July. Chinese banks could also reduce exposure to Swift by using CIPS more, a Bank of China International report said at the time.

The average daily volume of transactions handled by CIPS stood at 136 billion yuan ($20.8 billion) in 2019, with participation from 96 countries and regions, according to official data. Participation in the scheme has grown 74% since its launch, a statement from CIPS said.