If the last decade of global finance was defined by the efficiency of the dollar, the next may be defined by the fragmentation of payment rails. While the proposals for China’s 15th Five-Year Plan (2026-30) outline an ambition to push the renminbi further onto the global stage, the real story is not just about policy targets — it is about the plumbing of the global economy. At the center of this effort sits the Cross-Border Interbank Payment System (CIPS). For Beijing, CIPS is not merely a settlement tool; it is a strategic hedge against the potential weaponization of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.

CIPS has grown rapidly from a niche alternative to a strong competitor. Built by the People’s Bank of China, it now connects more than 1,700 participants worldwide, reaching over 5,000 banks in 190 countries and regions. Yet raw connectivity numbers can be deceiving. While CIPS is increasingly ubiquitous, it does not yet match SWIFT’s dominance in depth or habit. Nevertheless, it has become the backbone of RMB internationalization, reinforcing the currency’s position as the world’s third-most-used payment currency and a top-three trade finance currency. The momentum is visible in the data: RMB settlement in goods trade climbed to 27.2 percent in 2024 and rose further to 28.1 percent in the first half of 2025.

The system’s expansion has undeniably streamlined settlement and cut costs. In 2024 alone, CIPS processed 175 trillion yuan ($25 trillion) in cross-border transactions, a 43 percent jump from the previous year. However, China faces a “hardware vs software” dilemma. The country has built the hardware (CIPS), but it lacks the “software”, i.e., strong enough global confidence, and deep, unencumbered liquidity.

Most overseas participants in CIPS are still indirect members, relying on SWIFT messaging to communicate with the clearing bank. This creates a hybrid reliance that fails to offer full independence. Furthermore, offshore RMB liquidity pools remain a fraction of dollar liquidity, limiting adoption by non-Chinese institutions. The “pricing power” problem remains acute: While China is the world’s factory, commodities from oil to soy remain overwhelmingly priced in dollars. Without a shift in invoicing habits, a payment system is simply a pipe with too little water flowing through it.

Closing this gap requires more than just upgrading technology or deploying blockchain. It requires a market-based solution to a liquidity problem. Policy support, such as integrating the digital RMB or lowering entry barriers, is necessary, but the market ultimately demands efficiency and hedging capabilities.

This is where Hong Kong becomes indispensable — not just as a participant, but as the critical interface between the Chinese mainland’s closed capital account and the global market. Hong Kong solves the “confidence paradox” of the RMB: It offers Chinese liquidity wrapped in common law protections and free capital movement.

As the world’s largest offshore RMB hub, the city possesses the institutional depth required to power the next stage of internationalization. Since 2021, CIPS has expanded its footprint in Hong Kong, supporting Bond Connect settlement and integrating with the city’s Real Time Gross Settlement system. The integration is deepening: By the third quarter of 2025, 113 institutions in Hong Kong were participating directly in CIPS.

Hong Kong is effectively acting as a regulatory sandbox for the future of money. Through initiatives like the multilateral central bank digital currency bridge (Project mBridge), the Mainland-Hong Kong Fast Payment Link, and the Greater Bay Area QR code payment program, Hong Kong has become a proving ground for solutions that bypass legacy banking bottlenecks. Project mBridge, in particular, offers a glimpse of a future where central bank digital currencies can settle cross-border trades instantly, potentially rendering the correspondent banking model, as well as its reliance on the US dollar, obsolete.

Skeptics will rightly point out that Hong Kong faces its own challenges, including questions over its distinctiveness from the Chinese mainland, and the sustainability of the city’s own currency peg to the US dollar. However, for international investors and central banks diversifying their reserves, Hong Kong remains the only venue deep enough to absorb significant RMB flows without capital control friction.

The opportunity is clear. Hong Kong’s deep market foundation can provide the liquidity CIPS needs to operate at scale, while its internationally aligned financial rules broaden the ecosystem’s appeal. CIPS has established the infrastructure; Hong Kong must now provide the market depth.

If the RMB is to move from a catch-up player to a genuine alternative in the global payments landscape, it needs a trusted offshore catalyst. Hong Kong is not merely a passive conduit in this journey; it is the active engine. By leveraging its legal and financial infrastructure, Hong Kong can transform CIPS from a promising backup generator into a primary power source for the global economy.

The author is an Asia Global Fellow of the Asia Global Institute, the University of Hong Kong.

The views do not necessarily reflect those of China Daily.