China's cross-border payment system is reshaping the way Mongolia's banking industry handles cross-border capital flows.
According to Nanyang Post's report on July 31, as trade between Mongolia and its southern neighbors increasingly settles in the Renminbi, Mongolia's second-largest bank expects that most of the country's large banks will join this payment network within the next two years.
Golomt Bank has become one of the first banks in Mongolia to directly connect to the Cross-border Payment System for the Renminbi (CIPS). CIPS is a cross-border payment and settlement network for the Renminbi launched by the People’s Bank of China in 2015. Golomt Bank started handling related services last September.
In just six months, 96% of the Renminbi payment services of Golomt Bank have been transferred from the SWIFT messaging network to CIPS. Settlement time has been reduced from one to two days to near real-time. This also reduces the transaction costs for importers and small and medium-sized enterprises engaged in trade with China.
Gloomt Bank CEO Amarzaya Odonbaatar said, “In the past, all these transactions had to be carried out through proxy banks. Now, Gloomt Bank has become a direct participant in CIPS, so there is no need for further transit through other banks.” He added, “This method is quite cost-effective and also saves time for customers who handle cross-border business operations.”
CIPS was originally designed to facilitate cross-border transactions in the Renminbi. However, its strategic importance has continued to grow in recent years. Beijing is working to make CIPS a rival financial infrastructure to the Western-led SWIFT network. This is especially true after Western sanctions against Russia, which has further increased concerns about the over-reliance on existing international payment systems.
He said, “I am very sure that within one or two years, almost all major banks in Mongolia will join CIPS. This means that RMB transactions conducted through CIPS will grow rapidly.”
This change reflects the increasing financial influence of China in Mongolia, and the close connection between Mongolia’s economy and its southern neighbors.
Oudongbateer said that China purchases about 95% of Mongolia's bulk commodities for export, and it also serves as a source of supply for many consumer goods in Mongolia. Therefore, faster and lower-cost RMB settlement methods are becoming increasingly attractive to banks and enterprises.
