Baku, Azerbaijan, March 11
By Khalid Kazimov - Trend:
The launch of the China International Payment System (CIPS) is a necessary and desirable change for the Chinese economy and trade, as well as the countries and companies that conduct monetary and trade transactions with China, Kamran Dadkhah, a professor of economics at U.S. Northeastern University told Trend in a commentary on March 11.
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, Dadkhah stated.
"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.
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.
CIPS, which would be a worldwide payments superhighway for the yuan
Dadkhah noted that the current system is time consuming and allows for many mistakes, and therefore not suitable for the world's second largest economy.
Currently, cross-border yuan clearing has to be done either through one of the offshore yuan clearing banks in the likes of Hong Kong, Singapore and London, or else with the help of a correspondent bank in mainland China.
"Of course the economy (and the political system) of china need much fundamental change in order for the country to be able to continue its growth in the long run. The launch of this system is a necessary, however a small, step to that goal," Dadkhah added.
"But this system will not change much in regards to Iran and Iran-China relations," he stated.
"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.