A direct CIPS participant is a bank or other approved financial institution that holds its own account in the Cross-Border Interbank Payment System (CIPS), China's system for clearing and settling cross-border payments in renminbi, and connects to the system directly to send and receive payments. Direct participants settle their own payments in CIPS and can also process payments on behalf of other institutions.
All other institutions that use CIPS do so through a direct participant, as an indirect CIPS participant. The relationship mirrors the way smaller banks reach other national payment systems through a correspondent bank.
Background: CIPS
CIPS was launched in October 2015 to support the growth of cross-border RMB settlement. Before it existed, cross-border renminbi payments were cleared mainly through designated offshore RMB clearing banks or through correspondent accounts at mainland banks, using China's domestic high-value payment system. CIPS is operated by a dedicated company in Shanghai and is overseen by the People's Bank of China (PBoC). A second phase introduced later extended operating hours to overlap with business days in other time zones and added more settlement modes.
CIPS uses message formats based on the ISO 20022 standard. Messages between CIPS and participants can travel over its own network, and many participants also use SWIFT for parts of the payment chain, so CIPS is better described as a renminbi clearing and settlement system than as a replacement for SWIFT messaging.
Role of a direct CIPS participant
A direct participant typically:
- holds a CIPS account and is assigned its own system identifier;
- funds that account with renminbi liquidity, usually transferred from the mainland high-value payment system, and manages its balance through the operating day;
- sends and receives cross-border renminbi payments for itself and its customers;
- offers access to indirect participants, maintaining accounts for them and passing their payments into the system;
- meets the system's technical, operational and risk-management requirements, including business continuity and compliance obligations.
Because settlement occurs across accounts in the system, a payment between two direct participants can reach final settlement without passing through an intermediary bank, supporting faster payment finality than a multi-hop correspondent chain.
Eligibility
Direct participation is generally limited to banks and financial market infrastructures that meet the operator's criteria and are approved under PBoC rules. At launch the direct participants were banks operating in mainland China, including Chinese banks and the local subsidiaries of foreign banks. Over time, the list has expanded to include overseas branches and subsidiaries of Chinese banks, foreign banks in other financial centers and some infrastructure operators. The current list is published by the operator.
Smaller banks, payment companies and institutions without the scale to justify a direct connection typically participate indirectly. Becoming a direct participant involves investment in connectivity, liquidity management and staff, and it is mainly attractive to institutions with significant renminbi volumes.
Why direct participation matters
For banks serving clients that trade with China, direct participation means control over payment timing, fewer intermediaries and lower costs on renminbi flows. It can reduce the need for double currency conversion through the US dollar and gives the bank a role as a provider of renminbi services to indirect participants in its region.
Direct participants still apply the documentation and authenticity checks required for cross-border renminbi flows under the rules of the PBoC and the State Administration of Foreign Exchange (SAFE), and they remain subject to sanctions and anti-money laundering obligations in their home jurisdictions. CIPS also carries payments between the onshore and offshore RMB markets, so direct participants are important channels of renminbi liquidity outside mainland China.