The first phase of the Cross-border Interbank Payment System (CIPS) was launched on Thursday in Shanghai, promoting the global use of the Chinese currency.
"CIPS is an important milestone in the internationalization of the yuan," said Fan Yifei, deputy governor of the People's Bank of China, the central bank.
The system, which provides capital settlement and clearing services for cross-border yuan transactions for financial institutions, will boost the global use of the yuan, or renminbi (RMB), by cutting costs and processing times, he said.
Previously, cross-border yuan clearing had to be done either through one of the offshore yuan clearing banks, such as those in Hong Kong, Singapore or London, or with the help of a corresponding bank on the Chinese mainland.
CIPS will play a significant role in shoring up China's real economy and promote domestic enterprises "going abroad", said Fan.
The worldwide "payment superhighway", will accelerate the internationalization of the RMB, said Hu Xiaolian, president of the Export-Import Bank of China.
Developed and administered by the central bank, CIPS will run from 9 a.m. to 8 p.m. Beijing time.
Nineteen banks have been named direct participants of CIPS, including four major Chinese banks, and HSBC Bank (China), Citibank China and Standard Chartered China, all of which are allowed to open accounts with CIPS and receive services directly.
In addition, 38 Chinese banks and 138 foreign financial institutions have been approved as indirect participants. They are entitled to CIPS services indirectly through one or more of the direct participants.
Liao Yijian, president and CEO of HSBC Bank (China) said CIPS will encourage the cross-border use of yuan as the system was now less complicated.
CIPS will put the yuan on an even footing with other global currencies in areas such as operating hours, risk reduction and liquidity optimization, said Zeng Gang, professor with the Finance Institute of the Chinese Academy of Social Sciences.
In November 2014, the yuan became one of the world's top five payment currencies overtaking the Canadian and Australian dollars, according to global transaction services organization SWIFT.
As of Sept. 30, 2014, cross-border yuan settlement had exceeded 4.8 trillion yuan (750 billion U.S. dollars), up from 3.58 billion yuan in 2009.
The central bank designated 10 official yuan clearing banks last year, bringing the total to 14 globally.
"This is only the first step and we have more to do," said Central Bank Deputy Governor Fan Yifei.
He said CIPS phase two will offer participants more flexibility.
