Withdrawing from SWIFT is a challenge and an opportunity for China! People often say: Currency is money, and only when there are goods can there be money! China is the world's largest commodity producer, and the whole world cannot do without China's goods, but the currency can be chosen, and the payment system is also optional. How useful can a payment system without commodity transactions play?
Recently, there has been news circulating all over the Internet that the United States intends to kick China's major banks out of the SWIFT system. This rumor immediately attracted widespread attention and discussion. For a while, social media and major website forums were full of speculation about whether the US move would come to fruition and what impact it would have on China's and the world's financial and trade systems.
SWIFT is the largest and most important global integrated transaction system among the world's six major payment systems. Most international economic and trade transactions are carried out through this payment system. At present, the daily settlement volume of the SWIFT system has reached more than 5 trillion US dollars, and about 2,000 trillion US dollars for the whole year.
Despite the volume of transactions, most of the capital transactions are actually exchange transactions caused by financial derivatives transactions, rather than real trade in goods or services. In other words, these transactions are essentially the rapid flow and transformation of digital across the world, rather than a direct reflection of real economic activity.
Data for 2022 shows that the global trade volume in the SWIFT system totals about $32 trillion, of which trade in goods accounts for about $25 trillion, while trade in services is close to $7 trillion. As the world's largest foreign trade country, China's total trade in goods and services has exceeded 7 trillion US dollars, and it has achieved a trade surplus of up to 800 billion US dollars. These figures not only reflect China's important position in global trade, but also demonstrate the strength of China's foreign trade.
At present, a total of 30 banks in China have joined the SWIFT system, including Industrial and Commercial Bank of China, China Construction Bank, Bank of Communications, Bank of China, Minsheng Bank, Guangfa Bank, Shanghai Pudong Development Bank, China CITIC Bank and other well-known financial institutions. These Chinese banks account for nearly 90% of all cross-border transactions in China.
Does such a high proportion mean that once Chinese banks are kicked out of the SWIFT system, China's foreign trade will be unsustainable?
Obviously, this is not going to happen. While the SWIFT system plays an important role in global financial transactions, it is not the only payment and settlement channel. China can take a number of steps to address this potential challenge, including further internationalizing the renminbi, strengthening financial cooperation with other countries, and building a more diversified and stable payment system.
In addition, China can also take this opportunity to accelerate the development of its own payment and clearing system, such as expanding the application channels and scope of the RMB cross-border payment system CIPS, so as to reduce its dependence on the SWIFT payment system and ensure the long-term sustainable and stable development of the mainland's foreign trade.
In fact, as early as 2012, China's Bank of Kunlun was penalized by the United States for being removed from the SWIFT system. In the face of this challenge, Bank of Kunlun did not choose to back down, but resolutely carried out de-SWIFT operation, launched a barter cross-border transaction, and achieved remarkable success.
Since its 2023 annual report has not yet been released, taking the data of 2022 as an example, Bank of Kunlun achieved revenue of 6.744 billion yuan, a year-on-year increase of 11.80%, a total profit of 3.276 billion yuan, a year-on-year increase of 7.64%, and a net profit of 2.765 billion yuan, a year-on-year increase of 8.83%. Net interest income was RMB7.078 billion, up 25.29% year-on-year, and net fee and commission income was RMB1.513 billion. This impressive performance not only demonstrates the steady development of Bank of Kunlun after the de-SWIFT system, but also proves the resilience and innovation ability of China's financial system in the face of external pressures.
The reason why Bank of Kunlun has been able to achieve such results is that it relies on China's version of "SWIFT" - the Cross-border Payment System for Renminbi (CIPS). Through CIPS, Bank of Kunlun is able to efficiently handle cross-border payments, ensuring smooth transactions, while also driving the use and acceptance of RMB in the international market.
Bank of Kunlun's practice shows that even without relying on the SWIFT payment system, China's banking sector is able to maintain normal cross-border financial services through other channels, thereby providing solid support for China's foreign trade and investment activities.
It is no exaggeration to say that the pulse of global trade is now closely linked to the flow of Chinese goods. Goods produced in China can be found all over the world, whether on supermarket shelves in developed countries or in markets in developing countries. This dependence on Chinese goods in the global market has established China's central position in global trade, which has become a solid cornerstone of China's financial system in the face of challenges.
This fact reminds us that in the global payment system, Chinese goods are much more important than money and the payment system itself. Backed by a strong commodity production capacity and huge trade volumes, China is not afraid of US threats to kick Chinese banks out of the SWIFT system.
At the same time, the business network of the Cross-border Payment System (CIPS) has been extended to 182 countries and regions around the world, and nearly 4,400 banks and institutions have become members, of which more than 359 participants are from key partner countries of the Belt and Road Initiative. It fully demonstrates that CIPS is one of the alternative options for the international payment system, and its international influence and attractiveness are growing.