China’s RMB Internationalization Plan

Authored by GoldFix ZH Edit

Topics: (1150 words)

1. While the West Onshores Supply Chains…
2. ...The East Builds its own Payment Chains
3. Beyond mBridge
4. The Four Pillars of BRICS Payments
5. SWIFT: The Original Information Highway
6. CIPS: The Cross-Border Payment Engine
7. mBridge: Pioneering Digital Currency Transactions
8. BRICS PAY: A Unified Payment System
9. The 5th Pillar: A Coordinated Push for RMB Internationalization
10. Expectations: RMB’s Expanding Global Role
11. Final Comment: Gold’s Role

1- While the West Onshores Supply Chains….

Much has been made, and rightly so, of the supply-chain problems the West has had post Covid. The G7 has had to (and *still* has to) onshore, reshore, or friendshore the way it gets natural resources and key goods in a manner less dependent on the BRICS. nations.

But little has been made of the mirror image of supply chains, payment chains. Every time somebody buys something on a supply chain it changes hands. Every time it changes hands, somebody needs to get paid.

The US made it clear that without access to BRICS supply chains it depends upon to get goods; it would in turn be more likely to restrict access to its own Payment Chains for BRICS local trade. Those restrictions could come many ways. The most obvious is complete confiscation of any money in the Payment Chain system as was done to Russia. The continuous threat of sanction to other users is now ever present. The BRICS need their own payment chains now.

2- The East Builds its own Payment Chains

Not only is the G7 payment chain (The SWIFT/ USD system) less available and subject to sanctions, it is also an untrustworthy entity as far as BRICS nations are concerned. The West’s Payment chains have been weaponized along with the USD

Which means, the BRICS, if they seek to transact business between each other in an efficient manner, must build their own. That is precisely what they have been doing.

3- Beyond mBridge

Most readers know of mBridge since we first introduced it to subscribers back in December 2022 and began writing about it in January 2023 in WHAT BRICS WILL DO in our analysis of Zoltan Pozsar’s "War and Peace" missive. Most recently we posted on Agora, The G7 answer to mBridge.

But mBridge is only part of the plan to build their own payment chains. There are others needed to ensure liquidity gets to where it is needed. Interestingly, SWIFT is not rejected wholly, but soon will be forced to share space with newer “safer” platforms being built out in Asia.

China will benefit most from these projects. If they are successful, it will be the Chinese Yuan (RMB) that becomes globally liquid and used through these new payment chains. Thus, the BRICS buildout of payment chains will essentially be a superhighway to internationalize the Yuan.

There are four “pillars” of this plan as far as payment chains go: Swift, CiPS, mBridge, and BricsPay. Beyond the techno-plumbing, policy and regulations must also permit and encourage Yuan use globally with heavy emphasis on “recycling”. Here then is an overview of the bigger picture as far as China’s plans for Yuan globalization go, and along with it, world de-dollarization’s next phase.

4- The Four Pillars of BRICS Payments

The Renminbi (RMB) is making significant strides towards internationalization. This effort mirrors the ancient Silk Road, with the modern financial system represented by SWIFT, CIPS, mBridge, and BRICS PAY leading the charge. These four platforms collectively enhance the circulation and use of the RMB across global markets. With the combination of policy support and international cooperation, the RMB is being positioned to take on a larger role in the global financial system.

5- SWIFT: The Original Information Highway

SWIFT, established in 1973, plays a critical role in the RMB’s global transactions. The platform, traditionally the dominant messaging system for financial transactions, now facilitates RMB transfers, increasing efficiency and security. Its vast network of over 6,000 participating institutions globally has been instrumental in spreading RMB usage, contributing to its rising share in international payments, currently ranked as the fourth-largest payment currency at 4.61% as of June 2024. SWIFT’s reach ensures that RMB remains a significant player in international trade.

6- CIPS: The Cross-Border Payment Engine

The China International Payment System (CIPS), operational since 2015, offers a dedicated platform for RMB cross-border transactions. With 1,518 participants spanning 114 countries, CIPS has become an essential infrastructure for global RMB payments. Its primary role in promoting trade and investment, particularly in China, has enhanced RMB’s credibility as a global currency. By streamlining transactions and offering a secure, efficient settlement mechanism, CIPS has paved the way for smoother cross-border RMB operations, integrating the currency more deeply into international trade.

7- mBridge: Commodity Trade using Gold and CBDCs

Launched in 2021, the mBridge project is a collaboration between several central banks, including the People's Bank of China. The platform, leveraging blockchain technology, enables real-time cross-border settlements using central bank digital currencies (CBDCs). By reducing transaction costs and speeding up settlement times, mBridge marks a shift towards the future of digital payments. The platform’s success in pilot programs indicates its potential to revolutionize cross-border payments, bringing RMB to the forefront of the digital financial era.

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