China's international payment system ready

Opening up

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 the Chinese mainland.

"Misunderstandings under the current clearing system happen from time-to-time due to different languages and codings. The CIPS is a breakthrough since it will offer a united platform and enhance efficiency," said Raymond Yeung, an analyst at ANZ in Hong Kong.

The launch of CIPS will enable companies outside China to clear yuan transactions with their Chinese counterparts directly, reducing the number of stages a payment has to go through.

"This is a big development for the small and medium enterprise sector operating in China as their correspondent banks can now access a wider network for settling payments in yuan, leading to lower costs," said the head of treasury solutions at a large European multinational company based in Hong Kong.

For large international companies, CIPS will remove operational inefficiencies as companies will no longer have to worry about ensuring yuan transactions are processed at certain times of day, as they do now, he added.

China's yuan became one of the world's top five payment currencies in November 2014, overtaking the Canadian dollar and the Australian dollar, according to global transaction services organization SWIFT.

Global yuan payments increased by 20.3 percent in value in December compared to a year earlier, while the growth for payments across all currencies was 14.9 percent for the same period, SWIFT said.

China has accelerated the pace of yuan internationalization in recent years. The central bank assigned 10 official yuan clearing banks last year, bringing the total number to 14 globally that can clear yuan transactions with China.

The People's Bank of China was not immediately available for comment when contacted.