China's international payments system not good for Iran- economists

Business Materials 11 March 2015 16:47 (UTC +04:00)

Baku, Azerbaijan, Mar. 11

By Khalid Kazimov - Trend:

The new China International Payment System (CIPS) will not be so attractive to the countries of the Middle East, Central Asia, or Russia, Iranian-born economist Mehrdad Emadi of the U.K.-based Betamatrix International Consultancy told Trend in a commentary on March 11.

When CIPS comes, these countries will practically be overwhelmed by Beijing's financial penetration, he maintained.

China's long-awaited international payment system- projected to be commenced in September- to process cross-border yuan transactions is ready, and may be launched as early as September or October, sources told Reuters March 9.

This new system will make international clearings in the yuan quicker, cheaper, and safer, a professor of economics at U.S. Northeastern University Kamran Dadkhah told Trend.

The launch of CIPS will remove one of the biggest hurdles to internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.

Emadi further said that China's financial system is very tight and it would need to undergo major changes before CIPS can become internationally successful.

"Maybe it would be interesting for Iran to replace the clearinghouse system with CIPS, or that clearings may become faster for Iran, but there will be no benefit for Iran in practice," the economist asserted.

"Due to Western sanctions, Iran is cut away from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network. Right now, the country can export oil to five countries: China, India, South Korea, Taiwan, and Turkey; and turn its money into goods in those very countries for import, or store the money in banks in those countries."

Emadi believes that 90 percent of the Western sanctions can be instantly revoked; maintaining that removing all sanctions would require a time span of one year.

Iranian officials say that about $100 billion of the country's money has been frozen abroad and cannot be transferred to the country or elsewhere.

Dadkhah also says that "The problem with Iran is not to transfer yuan to or from China. The problem with Iran is the sanctions and its isolation from the world economy. Iran sells it oil to China (and other countries such as India) and has in return to import those countries' low-quality goods in return. Besides that, sums of Iran's oil money have been locked in these countries and Iran has no access to them. The launch of the efficient yuan clearing system will not solve Iran's problems. The reasonable, helpful approach to Iran is the settlement of the nuclear issue, the removal of sanctions, and joining the world economy."

China's exports to Iran witnessed an increase of 36.94 percent in terms of value in the first 11 months of the current fiscal year (March 21, 2014-Feb. 20), while the volume of the Islamic Republic's imports from China registered a 24.58 percent rise year on year.

Iran's imports from China accounted for 24 percent of its total imports in terms of value in the 11-month period.

China exported $11.581 billion worth of goods to Iran in the period which made the country main exporter of goods to the Islamic Republic, Iran's Customs Administration said March 2 in its latest monthly report.

Dadkhah belives that "Since China has the world's second largest economy in terms of GDP, and because the export of goods and services from China is over $2,400 billion a year (2013 statistics), the need for such a system is obvious," he underlined.

Edited by CN