This was usually achieved by shutting them out of the combined Swift and Chips global banking system through which an estimated 90pc of the world’s money is moved across borders. Chinese officials were particularly alarmed by the West’s decision to cut off Iran’s access in 2012 as part of international efforts to deprive Tehran of the funds needed to develop nuclear weapons.
China’s answer to this glaring vulnerability was to bypass the existing framework and create its own version: the Cross-Border Interbank Payment System, or ‘CIPS’, in 2015.
Again, there are widespread doubts about how effective it will be. In testimony to the powerful House Financial Services Subcommittee on National Security in 2022, the Washington-based think tank The Centre for a New American Security dismissed both CIPS and the digi-yuan as immediate threats to “mainstream financial plumbing”.
However, it had this warning: “These alternative payment systems are growing in technical sophistication and domestic adoption … these systems could gain traction internationally and scale up accordingly.”
“Chinese alternative payment systems could eventually erode the effectiveness of US and allied sanctions and challenge the institutions under the current financial order over the long run,” it went on.
According to the CIPS website, CIPS currently has 139 direct participants, 100 of which are in Asia, and 23 in Europe. In 2023, the volume of CIPS’ annual business was 123 trillion renminbi ($17 trillion). By the beginning of this year, average daily transactions had reached 666.8bn renminbi.
Collier cautions that CIPS “is miniscule in processing total currency transactions” whereas “Chips has at least 10 times as many participants and processes 40 times more transactions than CIPs.”
Again, Demarais warns against misinterpreting China’s aims. Its payments network may be much smaller than Swift but “it connects most banks across the world and would provide a backup if Swift were to disconnect Chinese banks”, she says.
Self-sufficiency is at the heart of President Xi Jinping’s ideology, says Charles Parton, a former diplomat and former special adviser on China to the Foreign Affairs Committee.
“This idea of self-reliance is central to everything that Xi Jinping thinks or says.”
This goes hand in hand with an anti-Western approach. “Anti-Americanism is … the foundation stone of Chinese foreign policy,” says Parton.
And the touchstone of America’s economic and geopolitical power is the hegemony of the US dollar.
The dollar’s position as the world’s reserve currency means countries are intertwined with the US economy. “In China they believe that the Western financial system has always been stacked against them,” says Parton.
As well as trying to move to assets outside of the dollar system, China is trying to de-dollarise its international transactions.
President Xi has a long-term goal for the renminbi to challenge the dominance of the dollar, an aspiration widely dismissed by economists. The dollar makes up 58pc of the world’s foreign currency reserves while the renminbi accounts for little more than 2pc, according to the International Monetary Fund (IMF).
