CIPS will replace the current arrangement for offshore CNY which uses designated clearing banks. CIPS does not replace SWIFT, but uses SWIFT messaging and formats. The net result is faster and more reliable cross-border CNY payments for all users.
What is CIPS?
We all thought CIPS stood for China International Payment System. But ever keen to keep us on our toes, China has apparently renamed it China Cross-border Inter-Bank Payment System. Thankfully they have kept the acronym CIPS. The new name does spell out some important aspects of CIPS: namely that CIPS is cross-border and interbank.
In essence, CIPS provides controlled cross-border access to the onshore CNY clearing system CNAPS2 (China National Automated Payment System version 2) for use in offshore and cross-border CNY payments, so that offshore CNY settlement can access onshore liquidity directly. It is modelled on USD CHIPS, i.e., it is a hybrid net settlement clearing system.