"China is going to be removed from SWIFT?
A few days ago, a self-media platform broke a fierce news that the United States intends to expel China from the International Interbank Telecommunication Association (SWIFT) system. This news quickly aroused strong attention on the Internet and sparked heated discussions.
What do you think about this momentous event? Let's start with the role and importance of the SWIFT system.
SWIFT is backed by the Diamond King
The International Association for Interbank Telecommunications (SWIFT) is a top-tier financial institution as you name it. Don't underestimate it, this is the "glue" of almost all banking institutions in the world, mainly responsible for handling cross-border and inter-bank fund transfers, information transmission and other important business.
Without it, it is tantamount to "choking" the global financial system. Banks will not be able to smoothly transfer transaction information to each other, and global trade and investment activities will be paralyzed.
Just listening to these features shows how transcendent SWIFT's place is in the global financial system. All the world's banks of a certain size have joined the telecommunications system. Tens of thousands of fund transfers and data transfers are made every day via the SWIFT network.
Don't be fooled by its name, SWIFT is a non-profit cooperative co-operative co-operative co-funded by 235 banks, including JPMorgan Chase and Goldman Sachs.
These banks can be described as the "top five diamonds", and SWIFT, as the "rigid demand" system that dominates the global financial information flow, has an irreplaceable position. Therefore, it is difficult for even the United States to manipulate it directly.
Russia and Iran have been "expelled and delisted"
Just last year, the United States became the "first country to be delisted" by pressuring SWIFT to kick Russian banks out of the system.
The reason is to punish the behavior of the Russian side in the Ukraine crisis and achieve the effect of sanctioning the Russian economy. In addition, Iran was subjected to similar "deceptive treatment" many years ago due to the nuclear issue.
After the delisting of Russia and Iran, although the domestic banking system barely maintained its operation, it was effectively cut off from the international financial system, and foreign exchange transactions and international trade were dealt a heavy blow, as if they were choked by the throat.
This gives us a glimpse of what will happen to SWIFT if China is expelled. At that time, the domestic banking business will not be able to smoothly connect with the outside world, foreign trade exports will suffer a heavy blow, and enterprises and banks may also face financial pressure.
But on the other hand, Russia has survived after being delisted, and international trade has not been completely interrupted, which also gives China some lessons to learn from.
What if I was really fired?
Having said that, will the United States really expel China from the SWIFT system? This kind of drama has not been staged before, but since the interests of both sides are at stake, the United States is afraid that it will think twice about acting.
After all, China is the world's second-largest economy, and if it were to be delisted, it would inevitably have a huge impact on the global trade and financial system, and the United States would definitely be implicated. This is a double-edged sword, and it is doubtful whether such a risk will be dared to be moved.
Even if it happens, China will do everything in its power to find other alternatives to reduce its losses.
From the outset, China was aware of the risks of over-reliance on the dollar and the SWIFT system and has been looking for alternatives:
1. Sign local currency swap agreements with countries along the "Belt and Road" to promote direct settlement of trade and investment in local currencies and bypass dependence on US dollars.
2. After Russia's delisting, Sino-Russian trade has been settled almost exclusively in RMB and rubles, and no longer uses US dollar intermediaries.
3. This year, it also signed local currency swap agreements with emerging market countries such as Brazil and Argentina. In the event of an extreme situation, it can be used for bilateral trade settlement.
4. Vigorously develop the digital yuan and explore a new cross-border payment model in the context of no cash and no US dollar. In the future, it is expected to combine blockchain technology to connect with the digital currency systems of other countries.
5. Build your own cross-border financial information transmission system (CIPS) to meet the needs of interbank information transmission.
All these efforts are aimed at one day smoothly breaking away from the dollar and the SWIFT system, and no longer being controlled by them.
The new payment system is worth looking forward to in the future
If China is indeed delisted, it will inevitably suffer some losses in the short term. But in the long run, this may just give China a chance to break away from the dominance of the dollar.
As long as we have a well-prepared plan and coordinate with our partners to build a fairer, more open and more diversified international payment system, then SWIFT will become a thing of the past and no longer threaten China's development.
Innovative solutions such as RMB internationalization, digital RMB system, local currency swap mechanism, and blockchain cross-border payment are not the focus of reshaping the new pattern of international payment.
No one can imagine what role the renminbi and China's innovative payment system will play in the future world trade and financial system.
Although SWIFT cannot replace it for the time being, China is ready to prepare for a rainy day and has no need to worry about the coercive rhetoric of the United States. Instead, we need to take this opportunity to accelerate the de-dollarization of trade and finance, and truly dominate the construction of the global payment and trading system.