What’s new: Banco Bocom BBM SA, a Brazilian bank controlled by China’s Bank of Communications Co. Ltd., has become South America’s first direct participant in the Cross-Border Interbank Payment System (CIPS), China's homegrown global clearing and settlement system for yuan-denominated payments.
The bank’s entry, announced at a China-Brazil business forum in Beijing earlier this week, will help reduce the costs of direct exchanges between the Brazilian real and the yuan, Banco Bocom BBM said in a statement.
Launched by the People’s Bank of China (PBOC) in 2015, CIPS is often referred to as China’s alternative to the SWIFT global payments messaging network. But so far the system’s reach is limited — at the end of 2021, CIPS had 75 direct participants and 1,184 indirect participants compared with SWIFT’s 11,000-plus connected institutions.
In February, the PBOC and the Central Bank of Brazil signed an agreement to set up yuan clearing arrangements in Brazil, making it the third South American country to do so — after Chile and Argentina. The Brazilian branch of Industrial and Commercial Bank of China Ltd., the world’s largest lender by assets, was authorized by the PBOC to be the clearing bank.
The background: China is Brazil’s top trading partner and largest source of foreign investment. Last year, bilateral trade in goods rose 4.9% to $171.5 billion, data from China’s customs administration show. Brazil’s biggest exports to China include soybeans, iron ore and crude oil, while its main imports from China are electrical and electronic equipment and machinery.
Related: China Formalizes Expanded Currency Swap With Argentina
Contact reporter Zhang Ziyu (ziyuzhang@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)
Get our weekly free Must-Read newsletter.
