Shanghai to be home of cross-border RMB transactions

A financial official in Shanghai government told the city's legislators that a new interbank payment system is planned for next year to deal with the increasing amount of cross-border transactions in renminbi.

"This is a major task for the coming year," the official, Wu Jun, said.

China's central government selected Shanghai as the home of the system because of the city's leading role in global RMB transactions.

Cross-border transactions have been increasing steadily in recent years, reaching 492 billion yuan ($81 billion) in 2012, with an annual increase of nearly 50 percent.

An interbank payment system with the ability to handle a large volume of such transactions in a given currency can turn a city a financial powerhouse. For example, the Clearing House Interbank Payment System, or Chips, in New York currently handles 95 percent of global dollar transactions.

According to statistics from the Society for Worldwide Interbank Financial Telecommunication, RMB was the second largest currency used for trade settlements as of October, with a market share of 8.66 percent, surpassing the euro.

But RMB as a trading currency ranked only 9th in the global foreign exchange market, according to the Bank of International Settlements.