CBFL Seminar Series: Clearing the Way to Renminbi Domination: CIPS, Antitrust, and Currency Competition by Professor Felix B. Chang

On 25 September 2025, the Centre for Banking & Finance Law was pleased to invite Professor Felix B. Chang, Robert J. Watkins/Procter & Gamble Professor of Law at the Ohio State University, to present a seminar entitled “Clearing the Way to Renminbi Domination: CIPS, Antitrust, and Currency Competition”.

Professor Chang started by introducing the Cross-border Interbank Payment System (CIPS), a funds transfer system that matches orders for Renminbi between participants (the clearing 9function) and effectuates payments and delivery (the settlement function). He gave an example of cross-border Renminbi settlement through CIPS, involving direct participants (banks that hold special accounts in CIPS and can directly access CIPS), indirect participants (banks that participate in CIPS through a direct participant), and end users. With the development of CIPS, offshore market participants can settle Renminbi transactions in Shanghai, instead of going through more cumbersome alternatives such as a clearing centre.

To paint a more comprehensive picture, Professor Chang compared CIPS with other financial market infrastructures that exhibit similar characteristics, including the Clearing House Interbank Payment System (CHIPS, a US dollar settlement system), SWIFT (a payment messaging system), and central counterparties in securities and derivatives markets. He noted that CHIPS is the closest analog to CIPS, as both are currency settlement infrastructures and are organized as private entities but maintain close associations with central banks. However, these two financial market infrastructures vary greatly in size and scope, largely due to differences in the underlying currencies, with the US dollar dominating a larger share of the payments and reserves than the Renminbi.

Professor Chang further elaborated on the network effects in CIPS. Specifically, CIPS features a small and uniform set of direct participants, mostly Chinese financial institutions and a few Chinese subsidiaries of foreign banks. In the adjacent trading market, the value and volume of transactions settled through CIPS are also lower than those settled through CHIPS. The lack of CIPS membership size and settlement scale leads to serious consequences, including low netting efficiency, great correlation risk, and reduced inter-participant connection. On a final point, Professor Chang explored the interplay between the upstream Renminbi clearing market and the downstream currency trading market to examine whether CIPS can help the Renminbi leverage its way to dominance. He concluded that CIPS alone cannot guarantee widespread acceptance of the Renminbi, because it facilitates transactions in a downstream trading market where the sole market-maker is the Chinese government (as the only issuer of Renminbi).