Payments linkage by China, Russia and India can challenge SWIFT hegemony

By Chu Daye Source:Global Times Published: 2019/10/29 22:08:40

BRICS members seek end to US dollar's dominance

Photo: IC

An alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) global payment system, which is being drawn up by China, Russia and India, has a fair chance to end the dominance of the US dollar in the global financial sector, Chinese analysts said Tuesday.

Russian news outlet RT reported Monday that China, Russia and India are working on an alternative to SWIFT that would connect an eye-catching 3 billion people in the three BRICS emerging economies. 

Huang Qifan, a former mayor of Southwest China's Chongqing Municipality with a reputation of being a financial expert, on Monday openly blasted SWIFT, saying that it - along with the Clearing House Interbank Payments System (CHIPS) - is being degraded into a financial tool of US long-arm jurisdiction and global hegemony. 

SWIFT is an interbank, nonprofit cooperative organization that provides transaction clearance services for its member banks. SWIFT takes strictly neutral positions. However, the US has great influence on the organization, to the point that it is capable of controlling SWIFT, industry observers said. 

CHIPS is an important component of SWIFT, as well as the key method for converting payments into the US dollar, processing transactions, and making electronic payment transfers and clearances. CHIPS deals with cash flows, while SWIFT is for information communication.

Huang is seen as the architect of the miracle of Southwest China's Chongqing, the nation's fourth provincial-level municipality, which had a record run of double-digit economic growth. He said at the Shanghai Bund Summit that SWIFT is out of date, inefficient and extremely expensive.  

According to RT, Russia, India, and China aim to connect their financial messaging systems to bypass SWIFT.

Russia's financial messaging system SPFS will be linked with China's Cross-border Interbank Payment System (CIPS). India plans to combine the Central Bank of Russia's platform with a domestic service that is under development. 

Iran, which is under US sanctions, also seeks to develop a joint alternative to SWIFT.

Experts said that Russia's boundless energy supplies, China's huge consumer base and India's young population may be a magic formula to form a viable alternative to SWIFT. They also noted that it will be part of the effort to dismantle US global financial hegemony.

Zhou Yu, director of international finance under the Shanghai Academy of Social Sciences, said that a connectivity program among the three countries' respective systems is a better way to augment influence in cross-border trading than building up that influence bit by bit over time.

Zhou said the effects of a linkage among systems is like the merger of two bourses -- and much faster in building up influence.

"Given the likelihood of the trade war morphing into a financial war or currency war, China also feels more than ever the urgency of beefing up its financial independence and sovereignty," Zhou told the Global Times on Tuesday. 

This effort could also expedite the yuan's internationalization.

Media reports said in June that Chinese banks are also under the threat of US financial crackdowns.

Global efforts

Globally, several countries including Venezuela, Iran and Russia are working on ways to bypass US hegemony in the financial sector, after the US used SWIFT to carry out its sanctions.  

The US is trying to dictate its rules and conditions to other states in the world through trade, tariff and sanctions pressure, said Igor Sechin, CEO of Rosneft, one of the world's largest oil companies. 

Rosneft ditched US-dollar payment for its oil exports on, switching to the euro, the company announced on October 24. 

Sechin said that financial monopolies can and should be resisted, and that the share of the yuan in cross-border settlement can increase from the current 2-5 percent to a more significant value in 10 years as the role of the Chinese economy grows, according to a press release Rosneft sent to the Global Times on October 25. 

"Creating an alternate SWIFT arrangement for Russia's, China's and India's monetary transfers will allow them to set up a more modern and locally grounded arrangement. It will also provide them with autonomy from a singular system that makes these three subservient to Western-controlled financial transactions," Swaran Singh, an Asian expert at Jawaharlal Nehru University in New Delhi, told the Global Times on Tuesday. 

Singh said that India supports the creation of alternate financial governance systems, such as a BRICS reserve currency pool and more recently, a credit-rating agency.

Arduous task

Zhu Jiejin, an international relations professor at Fudan University who follows BRICS developments, highlighted the difficulties in the drive to see SWIFT move from its central role in the global financial system into one of many alternatives.

"The drive will be extremely difficult, if not to say utterly impossible," Zhu said, noting that conflicts of interest among member countries in such an arrangement may ground the initiative. 

Newspaper headline: Linkage can challenge SWIFT hegemony

Posted in: ECONOMY

blog comments powered by Disqus