China on Friday announced the launch of its trans-bank foreign currency payment system to smooth foreign exchange transfers on the Chinese mainland.

The People's Bank of China officially launched a multi-currency foreign exchange (forex) payment system to meet the rising demand of trans-bank forex transfers between enterprises.

The system, which covers eight currencies including the euro, the Japanese yen, the Hong Kong dollar and the United States dollar, will shorten the forex transferring time and increase efficiency, the central bank said.

Foreign currency is banned from being circulated on the mainland. However, authorities have allowed forex settlement for eight types of payment needs such as trade insurance payments.

The system doesn't cover cross-board forex transferring. The system is limited to forex transfers for enterprises and is not open to individuals.

"The set-up of the system is a key move in China's payment system mechanism," said Su Ning, deputy governor of the People's Bank of China.

Eleven Chinese banks, which have nationwide networks, have joined the system. They include the country's big-four state-owned banks, Shanghai Pudong Development Bank and Industrial Bank.

More players, including overseas banks, can take part in the system based on their payment need, Su said.

The central bank decided to set up the system in February last year and started the Hong Kong dollar payment on April 28 after more than a year's system development.

More currencies were then added. The system has been running smoothly and meeting design requirements since it began operating.

Before the set-up of the system it took enterprises one to three days to finish the forex settlement, leaving them open to risks and increasing settlement costs.

(Shanghai Daily July 26, 2008)