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China's SWIFT joint venture a 'defensive move' in US financial war after Alaska talks underlined ongoing tensions

·4 min read

China's latest joint venture with the Belgium-based SWIFT financial messaging service is a "defensive move" amid ongoing tensions with the United States, highlighted by last week's fractious talks in Alaska.

China's central bank on Tuesday announced that a newly established joint venture with SWIFT and four Chinese institutions will offer localised financial services to make cross-border transactions more stable and secure.

Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.

"Many people had expected that now with [US President Joe] Biden, things would be different, but we saw last week in Alaska it is actually still the same. To the US, China is a threat and needs to be undermined in every possible way," said Oriol Caudevilla, strategic adviser at Alpha Bright Asset Management and fellow at the Digital Euro Association.

"The US will not accept that the world is changing and will keep imposing sanctions and escalate the financial war. This may affect China and may be a concern for China, and the joint venture is a defensive move."

As China's financial industry continues to open up to the outside world, more domestic institutions use the global financial network and information services provided by SWIFT.

But some Chinese medium and small-sized banks have reported unstable connectivity to the SWIFT network, affecting their cross-border transactions, the People's Bank of China (PBOC) said.

The new entity will operate financial messaging services through a local network and set up a localised data warehouse to monitor and analyse cross-border payment messaging, the PBOC added.

"The cooperation between SWIFT and Chinese-funded institutions is mutually beneficial with win win results," the PBOC said. "In the next step, supervision and guidance will be strengthened to promote the standardised development in all aspects of the financial gateway business."

But it remains unclear at this stage whether by operating a local network and setting up a localised data warehouse, the new joint venture with SWIFT can help circumvent the US sanctions by enabling Chinese companies to realise netting settlement services for their cross-border payments.

The SWIFT system has in the past afforded Washington broad powers to prohibit foreign countries from using the US dollar payments and clearing systems or restrict the US banking industry's business dealings with them, leaving them unable to receive payments for exports, pay for goods or own US dollar-denominated assets.

The joint venture also involves China's home-grown cross-border settlement system, Cross-border Interbank Payment and Clearing (CIPS), the Payment and Clearing Association of China, a self-regulatory association for the payments industry, and the PBOC's Digital Currency Research Institute.

Zhang Xiaohui, the former director of the monetary policy department of China's central bank, last year said that Chinese financial entities are worried by the threat of the US' long-arm jurisdiction hindering their US dollar settlement and clearing channels.

Most Chinese banks currently adopt a practice of making full US dollar payments and settlements directly with SWIFT abroad which are ultimately cleared in the US by passing through the US Clearing House Interbank Payments System (Chips), intensifying their dependence on the US financial system, Zhang said.

But China should instead refine its management of US dollar transactions and apply a net settlement approach, Zhang said. In many other countries, domestic banks first complete individual settlements locally before making the net settlement abroad, she said.

In 2008, Beijing launched the Domestic Foreign Currency Payment System, which allows Chinese banks to clear their US dollar transactions with the central bank. In 2009, the scheme was expanded to allow Chinese banks to connect to Hong Kong's US dollar clearing system via the Bank of China and Bank of China (Hong Kong).

Both payment arrangements allow Chinese banks to settle their US dollar payments initially with domestic authorities, who then clear their payments in the US in one consolidated transaction.

The method could minimise the scrutiny from the US on each US dollar transaction made by Chinese banks, helping prevent it from using SWIFT to cut off the clearing business between Chinese financial institutions and foreign institutions, Guan said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.

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    An Epic ski pass will cost 20% less next season, Vail Resorts revealed Tuesday, a strategic move designed to undercut competitors. Why it matters: The majority of skier visits now come from pass holders and two major resort companies —Vail Resorts and Alterra Mountain Company — battle for the lucrative market share. Get market news worthy of your time with Axios Markets. Subscribe for free.Moreover, selecting a ski pass is like picking a Hogwarts house — it defines you, determines your ski season friends and offers clues to your shred cred. What's new: Broomfield-based Vail Resorts opened pass sales for the 2021-22 season Tuesday with what they are calling a "price reset" that puts it well below the cost of Alterra's Ikon pass.An Epic Pass that covers 70 resorts worldwide — including Vail and Whistler Blackcomb — is now $783, down from $979 this season, with the more restrictive Epic Local Pass at $583.The Ikon Pass that covers 44 destinations worldwide — including Steamboat and Jackson Hole — is still $999 ($899 for renewals). The most basic pass increased to $729 ($649 for renewals). An alternative pass appeals to globe-trotters: For $499, The Mountain Collective offers two days at 23 different destinations and this year added a third day at one resort.Context: Vail Resorts reported a 28% decline in revenue through January, compared to the same time period last season.Skier visits are down 8% with the new pandemic reservation system, but the company announced it won't require reservations next season.Driving the move: Part of the price cuts, the company said, is to make the elite sport more inclusive and available to a larger customer base. For years, the cost of a lift ticket has skyrocketed. It's $219 for one day right now.A new Epic day pass is $87, or as little as $74 a day with a seven-day pass.Between the lines: Vail Resorts is betting the price reductions will generate more revenue through additional pass sales and skier loyalty."Today, as we double down on our pass strategy by dramatically reducing our pass prices, we are excited to make it easier for everyone to move into a pass," CEO Rob Katz said in a statement.The other side: Colorado's Arapahoe Basin is taking a different approach by capping its season passes and lift tickets to 10% fewer than were sold this season. The move is described to "preserve the culture and vibe" of the independent resort and create a better experience without massive lines.Of note: The Ikon Pass offers seven days at A-Basin.This story first appeared in the Axios Denver newsletter, designed to help readers get smarter, faster on the most consequential news unfolding in their own backyard.Sign up here.More from Axios: Sign up to get the latest market trends with Axios Markets. Subscribe for free

  • Western nations sanction China for Xinjiang abuses

    In the first coordinated Western action against Beijing under U.S. President Joe Biden, the United States, Britain, Canada and the European Union imposed sanctions on Chinese officials Monday for human rights abuses in the Chinese territory of Xinjiang, home to many ethnic minority groups. The move comes on the heels of a meeting last week between senior Chinese and U.S. officials, including Secretary of State Anthony Blinken, which laid bare tensions between the world’s two largest economies. “…and we certainly know and knew going in that there are a number of areas where we are fundamentally at odds, including China's actions in Xinjiang.” Western governments are seeking to hold Beijing accountable for mass detentions of Muslim Uighurs in Xinjiang. Activists and U.N. rights experts say at least 1 million Muslims are detained in camps in Xinjiang. They also accuse China of using torture, forced labor and sterilizations. China denies any abuses in Xinjiang and says its camps provide vocational training and are needed to fight extremism. Ahead of meetings with EU and NATO ministers in Brussels this week, Secretary Blinken on Monday said in statement that China (quote) "continues to commit genocide and crimes against humanity in Xinjiang” and that a united transatlantic response against Beijing (quote) “sends a strong signal to those who violate or abuse international human rights.” The EU was the first to impose sanctions Monday on four Chinese officials, including a top security director, a decision that was mirrored by Britain and Canada later in the day. The U.S., which had already blacklisted the top official in Xinjiang last year, added other senior Chinese officials to the list Monday. Beijing hit back immediately with punitive measures against the EU, blacklisting European lawmakers, diplomats, including families, and think tanks, and banning their businesses from trading with China.