(Yicai Global) Nov. 11 -- People’s Bank of China (PBOC) has set up of a payment versus payment (PVP) yuan-ruble payment system for financial businesses to lower exchange rate risks in trade, cankaoxiaoxi.com reported.
The China Foreign Exchange Trading System (CFETS) gained PBOC’s nod on Oct. 9 to institute PVP business for yuan-ruble transactions based on its High Value Payment System (HVPS), thus marking the official start of a PVP mechanism for yuan in China's forex market, PBOC said. PVP is a foreign exchange settlement mechanism that, to ensure transactional security, requires the simultaneous transfer of currencies in a settlement. The PVP platform for ruble and yuan (bypassing USD) marks a pivotal change in the world financial system. This news will put the wind up Wall Street banks who have worked for the dollar system since 1944, which has hitherto retained its dominance.
The true import of the PVP system is not that it lowers exchange rate risks where settlement is in local currency, but that it will create a vast new currency zone that has banished the buck, thus further isolating the US. CFETS also plans a similar PVP system for China’s Belt and Road initiative. This move comes as the latest step to using local currencies for settlement in bilateral trade by China and its fellow travelers on the New Silk Road, and paves the way to driving the dollar off it.