In a significant development, a report from the investment banking unit of China’s central bank states, Beijing should be ready for potential U.S. by being less dependent on SWIFT and instead use its own financial messaging network for cross-border transactions in the mainland, Macau and Hong Kong.
The country’s state lenders have been revamping contingency plans anticipating U.S. legislative action which could potentially penalise Chinese banks which provides services to serving officials of the Chinese government who have helped implement the new national security over Hong Kong.
It has called for greater usage of its Cross-Border Interbank Payment System (CIPS) in order to reduce the country’s exposure to China’s global payments data to the BOC International (BOCI) and the United States.
Previously Guan Tao, who co-authored this report, is the central bank’s chief economist; he was previously a director at the international payments department of State Administration of Foreign Exchange (SAFE).
The report looks at potential measures Washington could potentially take against Chinese banks, including cutting off their access to the SWIFT financial messaging service.
“A good punch to the enemy will save yourself from hundreds of punches from your enemies,” said the report, which comes at a time of deteriorating relating between the world’s two largest economies.
“We need to get prepared in advance, mentally and practically.”
n 2015, China had launched the CIPS clearing and settlement services system to help internationalize the usage of the yuan. CIPS is monitored by the central bank. In 2019, in a report CIPS had said, it processed $19.4 billion (135.7 billion yuan) in a single day with participation from 96 countries and regions.
The report said states, “if the United States were to take the extreme action of cutting off some Chinese banks’ access to dollar settlements, China should also consider stopping using the U.S. dollar as the anchor currency for its foreign exchange controls”.