CIPS (CIPS)
CIPS, the Cross-border Interbank Payment System, is China's clearing and settlement infrastructure for renminbi payments. It began operating in October 2015 and is supervised by the People's Bank of China. It settles RMB; it is not a general-purpose replacement for SWIFT.
Also called: Cross-border Interbank Payment System
CIPS provides clearing and settlement for cross-border and offshore renminbi business. Phase one began operation on 8 October 2015, run by an operator company established in Shanghai under PBOC supervision, and phase two followed in 2018. It uses a direct and indirect participant model: a relatively small number of direct participants hold accounts in the system and settle in it, while a much larger number of indirect participants reach it through one of them.
The distinction that matters most is between messaging and clearing, and it is the one most often collapsed. SWIFT is a messaging network: it carries instructions between banks and moves no money. CIPS is a clearing and settlement system for one currency: it is where RMB positions between participants are actually settled. They are not substitutes, and in practice many CIPS participants still use SWIFT messaging to reach it.
That is also why the common framing of CIPS as a sanctions-proof alternative to SWIFT does not survive contact with the mechanics. Using CIPS changes the currency and the clearing venue, not the exposure of the correspondent banks involved to the sanctions of the jurisdictions whose currency and financial system they also rely on.
In practice
CIPS settles renminbi. A business with a USD problem does not solve it by routing through CIPS, and a business that can settle in RMB usually has a China onshore or offshore banking question to answer first — including whether its counterparty can obtain the currency under China's own foreign exchange rules.
Example
A Bolivian importer paying a Chinese supplier can be quoted in USD, in offshore CNH or in onshore CNY. Only the last two involve CIPS at all, and which of them is available depends on the supplier's bank and on China's FX administration rules, not on the importer's preference.
Commonly confused with
| Term | How it differs |
|---|---|
| SWIFT | SWIFT carries messages between banks in any currency and settles nothing. CIPS clears and settles renminbi. A payment can and often does use both. |
| CHIPS | Similar acronym, different country and currency: CHIPS is the private US dollar clearing system operated by The Clearing House in New York. |
See also
- SWIFTSWIFT is a cooperative messaging network that banks use to send each other standardized instructions about payments. It does not hold funds and it does not move them; the money moves separately, through the accounts banks keep with one another.
- CHIPSCHIPS is a private-sector clearing and settlement system for high-value US dollar payments, operated by The Clearing House. Unlike Fedwire it nets: it matches and offsets payments continuously so participants can settle very large volumes with far less funding.
- RTGSRTGS stands for real-time gross settlement: a system that settles each payment individually and finally in central bank money, rather than offsetting many payments against each other and settling only the difference at the end of a cycle.
- Cross-Border PaymentA cross-border payment is one where the payer and the payee are in different jurisdictions. It usually involves a currency conversion and at least one intermediary, and it answers to the rules at both ends rather than only the sender’s.
- SettlementSettlement is the point at which value actually moves between parties and the obligation between them is discharged. It is a separate step from clearing, which only works out who owes what, and from finality, which is the moment the transfer can no longer be reversed.
- Capital ControlsCapital controls are government limits on moving money into or out of a country, or on converting its currency at the official rate. Imposed by a central bank or finance ministry, they determine whether a payment corridor is workable at all, and in which direction.
- Direct CIPS ParticipantA direct CIPS participant maintains an account in CIPS and connects directly to the system to process eligible transactions. Direct participation is generally limited to approved financial institutions and financial-market infrastructures.
- Indirect CIPS ParticipantAn indirect CIPS participant does not maintain its own settlement account in CIPS. It accesses CIPS services through a direct participant that processes eligible RMB transactions on its behalf.
- Cross-Border RMB SettlementCross-border RMB settlement is the payment and settlement of an international transaction in renminbi rather than another currency such as the US dollar. The transaction must still satisfy applicable banking, documentation, foreign-exchange and regulatory requirements.