China has launched its China International Payment System (CIPS), which is intended eventually to provide cross-border transactions denominated in its own currency, the Yuan or Renmimbi.[1] Why couldn’t China, and international Renmimbi users, simply rely on the already existing and well-established telecommunication system — the Society for Worldwide Interbank Financial Telecommunications (SWIFT) — which has functioned as a global network for bank transactions for over forty years?

To understand China’s CIPS initiative requires a closer look at how specialized financial telecommunications are embedded in global power structures.

Corporate trade and investment generate enormous volumes of financial data to accompany transactions of many kinds. As U.S. businesses moved into transnational markets throughout the postwar decades, they turned to big banks to help them exchange payment data across national jurisdictions. Some leading U.S. banks addressed this opportunity by developing proprietary computer systems and linking to their corporate customers. A more encompassing option was established in the early 1970s through  SWIFT, a global system for sending and receiving instructions about payments and other financial transactions. No actual money transits the network: the money itself is sent via separate electronic funds transfer networks. By standardizing the format for such messages and winning over a growing fraction of international financial institutions, however, SWIFT surpassed individual banks’ proprietary systems. [2]  Today, nearly 11,000 financial institutions and corporations located in over 200 countries use SWIFT to exchange millions of messages each day.  SWIFT has grown into an essential infrastructure, not only of international finance but also world trade and investment.

One might think that such a mechanism would be above controversy, in that it provides only a technical means for conducting cross-border financial exchanges; but one would be mistaken. Politics has impinged continually on the network. This reflects its unbalanced control.

SWIFT is organised as an industry “cooperative” and governed by a board of directors. There are 25 seats on the board, with the United States, Belgium, France, Germany, UK, and Switzerland each holding two seats[3]; the majority of countries do not have a seat. There are three main SWIFT operation centers through which all international financial data travel — one data center is located in Culpeper, Virginia, US and other two are Zoeterwoude, Netherlands and Dissenhofen, Switzerland. The US and Europe, its political ally, have a firm grip on the control of the system.  This helps to keep the dollar secure as the leading means of payment, with about a 45{17f48941629941408d54a014d0f93d93b36accbdc22b35d759326eee58f33f56} share of global payments (ranked by value)[4]; and to grant the Euro second place, with a 27{17f48941629941408d54a014d0f93d93b36accbdc22b35d759326eee58f33f56} share.[5]

Because SWIFT has become so vital, exclusion from the system can have a devastating impact. Given the importance of the U.S. dollar in investment and global financial markets, the United State has a capacity to project its political and economic power through the payments system.[6] The U.S. has used SWIFT as a tool of its foreign policy by banning Cuba and Iran, respectively, from using SWIFT. In 2012, the US pressured SWIFT to exclude Iran from the global banking system, in what was reportedly a crippling economic sanction.[7] In 2015, as part of their for Ukraine strategy, the US and the EU considered banning Russia from using SWIFT; they only rejected this option because international financial linkages are so intricate and extensive that expelling a big user such as Russia might well trigger unexpected collateral damage in third countries.[8]   However, interestingly, instead of being excluded, Russia gained a seat on the SWIFT board.[9]

SWIFT enables not only U.S. economic warfare but also surveillance. In 2013, Germany’s Der Spiegel publicized[10] that the U.S. National Security Agency monitors financial transactions conducted over SWIFT.  The U.S. Treasury has admitted that since the Sept. 11 attacks, it has tracked millions of confidential financial data transactions transmitted through SWIFT.[11]

US control of cross-border financial telecommunications faces challenges, however, as the geopolitical-economic landscape has changed during recent years.

At the onset of the financial crisis, U.S. and European banks dominated international finance. By 2015, however, several top European banks had fallen from their top rankings.  While a few U.S. banks had also grown, the big change was that a handful of giant Chinese banks now boasted larger assets.[12]  And these Chinese banks, which were still bit players outside the domestic Chinese market, were intent on expanding internationally.  To do so, they would need to promote the renmimbi as a global currency. Though it has surpassed Japan’s yen to become the world’s fourth-most important means of payment, the renmimbi claims a mere 2.8{17f48941629941408d54a014d0f93d93b36accbdc22b35d759326eee58f33f56} share of transactions ranked by value.

In the summer of 2015, responding in part to the U.S. proposal to exclude it from SWIFT, Russia proposed a global interbank payment system for the BRICS countries (Brazil, Russia, India, China, South Africa).  An actual rival appeared with the launch of the China International Payment System, aka CIPS. To set up an infrastructure for CIPS, interestingly, the People’s Bank of China is working with 19 international banks – including the Chinese units of eight foreign banks.

CIPS has a three-fold purpose. First, it is intended as a means of making China’s domestic payments system — which of course supports only Chinese characters — interoperable with the cross-border network (SWIFT does not accept Chinese characters). Second, it is aimed at reducing China’s dependence on the US and European banks that dominate SWIFT’s decision-making apparatus. Third, as the Financial Times delicately relates, “spying is also a concern.” In using SWIFT, China must rely on what one informed analyst terms “a payments system that is highly susceptible to being accessed by intelligence agencies from the US.” [13]

CIPS aims to boost China’s currency into wider international circulation – both as a means of payment and an investment currency, which will allow “its government and corporations smooth access to raise funds overseas.”[14]  This, certainly, will serve a fourth objective:  to support China’s geopolitical-economic ambitions.

China’s CIPS initiative has a significant implication for the current US and EU-controlled global financial system. If in the future, the US and Europe decided to kick Russia out of SWIFT, might Russia find an alternative for routing its financial data in China’s payment infrastructure?  International trade, investment, and finance have been pegged to, and contoured around, the U.S. dollar.  The U.S. Treasury aims to keep it that way.  In the emerging era this may prove increasingly difficult.


[1] Gabriel Wildau, “China launch of renminbi payments system reflects Swift spying concerns,” FT 8 October, 2015.

[2] Susan V. Scott and Markos Zachariadis, “Origins and Development of SWIFT, 1973-2009,” Business History 54 (3): 462-82 at 472.

[3] SWIFT Board of Directors

[4] This status is also dependent on the dollar’s ability to serve as a global measure of value, as commodities crucial to industrial production – oil but also others – have been priced in dollars.

[5] Gabriel Wildau, “China Launch of Renmimbi Payments System Reflects Swift Spying Concerns,” FT 8 October 2015.

[6] Randall Mikkelsen, “U.S. dollar role in sanctions, AML fight threatened by looming rival payments system,” Reuters, 14 May, 2015

[7] Rachelle Yongla & Roberta Rampton, “U.S. pushes EU, SWIFT to eject Iran banks,”  Reuters, 15 February 2014; Mina Khanlarzadeh, “The Effects of The Economic Sanctions Against Iran,” Jadailyay, 26 July, 2013,

[8] Indira A.R. Lakshmanan and Andrew Mayeda, “Russian Cutoff From Banking Backbone Said To Be Ruled Out,” Bloomberg Business Week, 19 March 2015.

[9]Compliance and standards top the agenda at biggest ever Moscow Business Forum,” Society for Worldwide Interbank Financial Telecommunication, 13 May, 2015.

[10]’Follow the Money: NSA Spies On International Payments,’” Der Spiegel, 15 September 2013.

[11] Constant Brand, “Belgian PM: Data Transfer Broke Rules,” Washington Post, 28 September, 2006.

[12], “Europe Will Always Need Investment Banking,” FT 15 October 2015,  at  ; Tom Farthing, “The Banker Top 1000 World Banks Ranking 2015,” 29 June 2015 ; Dan Keeler, “Features: Global Finance Ranks The World’s 50 Biggest Banks, As Measured By Total Assets,” Global Finance, 1 October 2007.

[13] Gabriel Wildau, “China Launch of Renmimbi Payments System Reflects Swift Spying Concerns,” FT 8 October 2015.

[14] James Kynge, “ China Poised to issue sovereignty debt in renminbi in London,” FT 14 October 2015.




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