CNY Internationalisation and CIPS: What It Means for Business Payments

China's renminbi (RMB) internationalisation project — the multi-decade policy initiative to expand the currency's role in global trade, investment, and reserves — has made measurable progress over the past decade, but it continues to fall short of displacing USD as the dominant global trade currency. For businesses with China exposure, the key practical questions are not whether the RMB will eventually rival the dollar but rather: can payments to and from China be made more efficiently in RMB today, what does CIPS (Cross-Border Interbank Payment System) offer that SWIFT does not, and what are the realistic constraints on RMB use for international business in 2026?

CNY vs CNH: The Two-Market Structure

The first and most fundamental distinction for businesses engaging with Chinese currency is between CNY (onshore renminbi, traded in mainland China under People's Bank of China capital controls) and CNH (offshore renminbi, traded freely in Hong Kong and other offshore centres). They represent the same underlying currency but operate in structurally different regulatory and market environments.

CNY is subject to PBoC management: the central bank sets a daily fixing rate (the CNY central parity rate, published each morning) around which spot CNY/USD can trade within a 2% band. Capital flows in and out of mainland China in CNY require regulatory approval; foreign businesses cannot freely hold onshore RMB balances without appropriate licensing, and converting large CNY balances to foreign currency involves approval processes through the State Administration of Foreign Exchange (SAFE). For most international businesses, direct CNY access is limited to approved channels such as the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme or bilateral settlement arrangements under China's free trade zone programmes.

CNH trades freely in Hong Kong's offshore market, without PBoC trading band restrictions (though the PBoC intervenes periodically). CNH and CNY typically trade close to each other — spreads of 100–200 pips in normal conditions — but can diverge sharply during periods of capital flow pressure or market stress. Foreign businesses making payments to China most commonly use CNH, with the payment routing through Hong Kong's offshore RMB infrastructure before entering mainland China. For deliverable forwards and options, CNH is the hedgeable offshore RMB, while CNY non-deliverable forwards (NDFs) settle in USD and are used by parties that cannot access deliverable CNH markets.

CIPS: Architecture and Current Scale

The Cross-Border Interbank Payment System (CIPS) was launched by the PBoC in 2015 as an alternative to SWIFT for RMB cross-border payments. By 2025, CIPS had over 1,400 direct and indirect participant institutions across more than 100 countries, processing approximately RMB 100 trillion ($14 trillion USD equivalent) annually. This is significant scale — but context is essential: SWIFT processes approximately $5 trillion in cross-border payments daily, roughly equivalent to the CIPS annual volume in approximately 10 business days.

CIPS operates on two levels. Direct participants hold accounts directly in the CIPS system and can send and receive RMB payments through their own CIPS connection. Most direct participants are major Chinese banks (Bank of China, ICBC, CCB, ABC) and large international banks with significant China business (HSBC, Standard Chartered, Citibank, Deutsche Bank). Indirect participants — the majority — access CIPS through a direct participant acting as their agent, similar to how smaller banks access SWIFT through correspondent bank relationships. This means that for most businesses, CIPS access is indirect, via their own bank's relationship with a CIPS direct participant.

CIPS is not a full SWIFT replacement. It handles RMB-denominated settlement but relies on SWIFT's messaging standards (ISO 20022 compatible, previously SWIFT MT format) for a significant portion of its messaging infrastructure. The system is best characterised as a dedicated RMB settlement layer rather than a completely parallel interbank messaging network.

RMB in Global Trade: Current Share and Trajectory

According to SWIFT's monthly RMB tracker, as of early 2026, the RMB accounts for approximately 4.5–5.0% of global payments by value — making it the fourth or fifth most used currency for international payments globally, behind USD (approximately 47%), EUR (approximately 23%), GBP (approximately 7%), and JPY (approximately 3.5%). This represents meaningful progress from approximately 1.5% five years earlier, but the gap between RMB and USD remains enormous.

The RMB's share of allocated global foreign exchange reserves is approximately 2.8% (IMF COFER data), compared to USD at 59% and EUR at 20%. Despite significant growth in bilateral RMB settlement agreements — China has settled trade in RMB with Russia, Brazil, Saudi Arabia, and ASEAN countries at increasing volumes since 2022 — the structural factors supporting USD dominance (deep US Treasury market, USD invoice inertia, correspondent banking infrastructure) remain intact.

For businesses with China supply chain exposure, the most practically relevant development is the expansion of RMB settlement for trade invoicing. A European manufacturer paying Chinese suppliers in USD adds an implicit FX step (USD acquisition cost) and relies on Chinese suppliers converting USD receipts to CNY — both parties bear FX costs. Settling the same transaction in CNH eliminates one FX conversion step: the European business converts EUR to CNH, the Chinese supplier receives CNH and converts to CNY domestically, eliminating the USD intermediary. Whether this saves cost depends on CNH liquidity and the EUR/CNH rate compared to the USD route.

Practical Business Considerations for RMB Payments

For businesses outside China wishing to make or receive RMB-denominated payments, the practical infrastructure considerations are:

• Bank connectivity: Not all banks offer CNH accounts or RMB payment routing. Major international banks (HSBC, Standard Chartered, Citibank) and specialist Asia-focused institutions have established CIPS connectivity. Smaller regional banks often route RMB payments through USD intermediation, defeating the purpose of RMB settlement.
• SAFE approval requirements: Large-value capital account transactions into mainland China in RMB (equity investment, intercompany loans above thresholds) still require SAFE registration and may be subject to conversion restrictions on repatriation. Trade account transactions (goods and services) have been liberalised significantly and can generally be settled in RMB without individual approval, though documentation requirements apply.
• Liquidity and timing: CNH spot settlement is T+2, the same as most other major currency pairs. CIPS domestic processing windows mean that payments initiated late in the business day in European time zones may not settle until the following business day in China.
• Hedging: CNH deliverable forwards are available from major banks and specialist providers including CCYFX for common pairs (EUR/CNH, GBP/CNH, USD/CNH). Liquidity is significantly less than major G10 pairs; bid-offer spreads are wider and large-notional hedges may require more lead time. CNY NDFs (settling in USD offshore) are the alternative for businesses that cannot access deliverable CNH.

CIPS and Sanctions Considerations

Since the 2022 Russian asset freezes and partial SWIFT disconnection of Russian financial institutions, China has actively positioned CIPS as a sanctions-resilient alternative for jurisdictions concerned about USD payment infrastructure vulnerability. For US and EU-based businesses, routing payments through CIPS rather than SWIFT does not provide sanctions immunity — OFAC's SDN list applies to USD-denominated transactions and to entities doing business with sanctioned parties regardless of payment rail. However, for businesses in non-sanctioning jurisdictions or for China-specific trade flows that are not subject to US or EU sanctions, CIPS routing reduces exposure to US correspondent bank compliance filters, which have occasionally caused delays and rejections on entirely legitimate transactions.

CCYFX provides CNH spot and forward execution, as well as CNH-denominated account infrastructure through our Hong Kong subsidiary, for businesses with China payment and hedging requirements. Our Hong Kong operations provide direct access to CNH market liquidity in the relevant time zone. Contact us to discuss your RMB requirements.