(Yicai) June 25 -- China is building its own financial security barrier, from the increasing use of the yuan for cross-border transactions to the rise of the Cross-Border Interbank Payment System, but the CIPS and the mBridge central bank digital currency project aim to reduce trade costs and mitigate the risk of dependence on single payment methods rathar than replace the Society for Worldwide Interbank Financial Telecommunications, according to speakers at the World Economic Forum's Annual Meeting of New Champions, also known as the Summer Davos forum.

The structural transformation of the payment system is an inevitable trend, but it will not evolve into complete opposition, fragmentation, or even collapse, several speakers said during the "Is Finance Dividing Us" sub-forum yesterday.

Hong Kong's Financial Secretary Paul Chan Mo-po first denied that the global financial system is divided into opposing factions. It is necessary to fully understand that different economies hope to use more of their currencies for settlement to avoid exchange rate risks and lower trade costs, he stressed.

The huge trade volume has given rise to the rigid need for local currency settlement, Chan said. China surely prefers to use the yuan more, but the percentage of transactions processed using the redback is still relatively low, he noted, adding that the proportion of the yuan in central banks' reserve currencies is still in the single digits.

In the current global financial sector, countries are increasingly valuing their own financial strategic autonomy, but this trend does not mean that the global financial system is moving towards fragmentation or even collapse, noted Ashor Sarupen, deputy finance minister of South Africa.

Objectively speaking, the US dollar still dominates the global payment system, and the pricing and settlement of commodity trade mainly rely on the greenback, Sarupen said. As a major trading nation, China vigorously promotes efficient and real-time cross-border settlement in yuan, he added.

The reason for promoting the transformation of local currency settlement is to achieve more strategic initiative and autonomy, as well as to enhance the convenience and flexibility of trade settlement, Sarupen pointed out.

The core of building the CIPS is to provide supporting infrastructure for the yuan internationalization and serve for the settlement of foreign trade in yuan, said Fang Xinghai, vice chairman of the China Securities Regulatory Commission. The system is still in its early stages of development despite making some progress, with over 80 percent of China's foreign trade still settled in US dollars, he added.

There is no need to worry too much about the market's widespread concern about the weaponization of the dollar and the fragmentation of the global financial system, Fang stressed. The United States will not lead to extreme financial fragmentation due to its internal conditions, such as its own fiscal deficit and the rise of treasury bonds, he noted.

The goal of the mBridge is to accelerate cross-border payments, cut transaction frictions, and lower overall settlement costs, Chan said. The dominant position of the US dollar in the global payment, commodity pricing, and settlement system will not fundamentally change in the short term, continuing to exist in the long term, he pointed out.

Editor: Martin Kadiev