Electronic Payments Boost Renminbi Business

Cross-border electronic payments are an important link in the circulation of credit and currency，and have a key role in promoting the internationalization of the renminbi. This article examines the relationship between cross-border electronic payments and renminbi settlement and discusses the process of cross-border electronic foreign exchange collection and payment. It also looks at the rapid development of cross-border electronic payments，and how this can facilitate renminbi settlement of cross-border trade.

Cross-border Electronic Payment and Renminbi Settlement

The process of currency internationalization is largely an extension of the functions of a modern currency. An international currency has three major functions，namely as a bookkeeping unit，a transaction medium，and a means of storing value. Cross-border electronic payments are closely related to these three functions. The process of currency internationalization generally goes from settlement currency to investment currency and then reserve currency. Cross-border electronic payments are closely related to two of the major functions ¨C as a transaction medium and a bookkeeping unit in the private and official sectors. Third-party payment platforms connect the functions of transactions and accounting between the private sector and the official sector through cross-border electronic payments，and at the same time build a new means of making settlement of cross-border trade using renminbi.

Cross-border capital flows via the Internet are comprised of cross-border income and cross-border payments，and this naturally requires foreign exchange settlement and sales. Cross-border e-commerce generally processes cross-border payments and cross-border income through a third-party payment platform. The third-party payment platforms make aggregated purchases of foreign exchange. Some overseas electronic payment companies support the overseas online payment using bank cards from China in order to expand their footprint in China’s huge online payment market. Cross-border payment and cross-border income are closely related to renminbi settlement of cross-border trade.

In 2013，17 domestic third-party payment platforms such as Alipay，Tenpay，China UnionPay，ChinaPnR，and Tongrongtong were included in the first batch of participants in the pilot cross-border electronic payments trial program. Domestic third-party payment platforms began to participate widely in e-commerce transactions. In January of 2015，the State Administration of Foreign Exchange (SAFE) launched a nationwide pilot program for cross-border foreign exchange payments involving payment agencies. The number of participating companies has since expanded from the original 17 to 269 with payment business licenses. These payment agencies are permitted to provide foreign exchange funds collection and settlement in cross-border e-commerce transactions. Payment platforms can collect foreign exchange orders from both sides of a transaction in small-sum e-commerce deals. Foreign exchange settlements are then processed through banks.

According to the original payment policy，in the process of cross-border electronic transactions，foreign trade payment and settlement services provided by the third-party payment platform mainly needed to use US dollars for settlement in Hong Kong. The customer then transferred funds to the China mainland through other channels. After SAFE initiated a cross-border electronic payment service，the third-party payment platform could directly process settlements for customers in China. The launch of the cross-border third-party payment platforms has provided more convenient and effective services for a range of transactions such as overseas education，airline ticket services，hotel accommodation and other customer needs. The domestic third-party payment platform can therefore provide more services for customers and allow the expansion into new businesses. At the same time，the areas and types of renminbi cross-border settlement activities have been expanded.

According to the new Payment Business License，third-party payment platforms that obtain pilot foreign exchange payment licenses can provide collection and settlement services for foreign e-commerce trading parties through banks. The third-party payment agencies of the Shanghai Free Trade Zone have extended the Internet payment business offshore and established a real-time cross-border electronic payment processing platform to meet customer demand. This makes use of third-party payment platforms for retail transactions，facilitating overseas shopping.

Alipay teamed up with financial institutions such as Bank of China in August 2007，jointly launching cross-border payment and settlement services. Since 2009，Alipay has cooperated with VISA and MasterCard to facilitate operations in Chinese territories of Hong Kong，Macau and Taiwan，allowing cardholders to make purchases through Taobao.com，completing the network for two-way cross-border payment services. As of now，Alipay’s cross-border payment services cover 34 countries and regions around the world，supporting over 12 foreign currencies，including the US dollar，euro，pound sterling，and Swiss franc. In June 2012，Alibaba signed a strategic cooperation agreement with qiwi wallet，an electronic payment company in Russia，as part of an effort to develop the markets in countries participating in the strategic development program，the Belt and Road initiative. Buyers in Russia were able to recharge their qiwi wallet account to access Alibaba’s PayPal. After purchasing a product，the seller can make shipment once the payment appears in the system. At present，China’s third-party payment platforms have been actively involved in cross-border e-commerce transactions (see table1 ).

With the improvement of China’s import and export trade and the rapid development of cross-border e-commerce，more cross-border e-commerce payment opportunities have emerged. At present，cross-border payments for individual users in China are mainly cross-border retail purchases or cross-border money transfers and remittances. Consumers using the Internet for cross-border purchases account for 65.7% of all transactions. Moreover，some 39.5% of Internet users frequently make cross-border payments. As the application of Internet technology in modern society is becoming more and more widespread，cross-border trades between consumers shopping online and merchants doing cross-border business have become increasingly frequent. As a result，cross-border electronic payment services of third-party payment platforms have been developing at a rapid pace. Transactions have become paperless with a separation of trading counterparties. Meanwhile，purchase and settlement methods have gradually become more diversified. In 2013，China’s largest third-party payment platform，Alipay，made a total of US$1.5 billion in cross-border payments.While that is an impressive sum，it is still only 5% of China’s total cross-border e-commerce. The remaining market share is dominated by other overseas payment companies，such as Paypal.

Cross-border Electronic Payment Promotes Renminbi Settlement

As cross-border e-commerce promotes the growth of China's foreign trade，payment activities will inevitably involve the use of renminbi. In July 2009，China began to promote renminbi settlement in cross-border trade on a trial basis. The pilot programs were expanded from four provinces and cities，including Shanghai and Guangdong province，to the entire country，and eventually offshore. The settlement amount of cross-border trade increased from 506.1 billion yuan in 2010 to 4.63 trillion yuan in 2013 and 3.27 trillion yuan in the first half of 2014. In May and June of 2014，the State Council announced its 16 New Rules Concerning Foreign Trade and the People’s Bank of China unveiled its Several Opinions on Supporting the Stable Growth of Foreign Trade. These supported the promotion of renminbi settlement in cross-border trade. In the first half of 2015，the State Council issued four more documents to support the development of cross-border e-commerce，thereby demonstrating the important role in promoting renminbi settlements in cross-border trade.

There are three requirements for third-party payment platforms in conducting renminbi payments in cross-border trade. First，overseas merchants on cross-border e-commerce platforms must be willing to accept renminbi settlement. Second，overseas banks must be willing to help third-party payment platforms open renminbi accounts and third，overseas consumers must be willing to pay in renminbi.

In 2013，authorities managing renminbi payment and settlements -- the State Administration of Foreign Exchange and the People’s Bank of China -- opened two major channels in accordance with the characteristics of cross-border e-commerce retail sales. First，阅读全部文章，请登录数字版阅读账户。 没有账户？ 立即购买数字版杂志