Libya connects banks to China’s CIPS to cut dollar dependence

Libya's Central Bank Governor Naji Mohammed Issa and People's Bank of China Governor Pan Gongsheng agreed Saturday to connect Libyan commercial banks to China's Cross-Border Interbank Payment System, establishing a direct channel for yuan-based transactions aimed at reducing reliance on the US dollar.

Strategic Partnership

During Issa's visit to Beijing, the two governors reviewed bilateral trade volumes and discussed mechanisms to strengthen commercial ties and increase growth rates, according to a statement from the Central Bank of Libya. "The importance of launching a new phase of genuine strategic partnership between the two central banks was discussed. It was agreed to connect Libyan commercial banks to China's Cross-Border Interbank Payment System, CIPS, which will simplify financial transfers and make them easier to conduct," the statement said.

Yuan-Based Infrastructure

CIPS was launched by the People's Bank of China in 2015 to facilitate international transfers using the yuan. It serves as an infrastructure enabling banks to send and receive yuan-denominated payments directly, eliminating the need to process transactions through intermediary banks and reducing dependence on the US dollar.

The two sides also agreed to address existing obstacles and facilitate trade procedures to increase bilateral commerce, beginning with the implementation of direct money transfers to China for small-scale traders. They further agreed to allow letters of credit to be opened directly through Chinese banks, the statement added.

Banking Cooperation

An official Libyan banking delegation headed by the Central Bank governor and accompanied by directors of Libyan commercial banks will visit Beijing at the earliest opportunity to meet their Chinese counterparts. The planned visit aims to establish cooperation between commercial banks in both countries and to benefit from China's experience in electronic payments and direct financial transfers.

The measures would help reduce reliance on the informal market and ensure compliance with anti-money laundering and counter-terrorism financing standards. They are also expected to improve the reputation of Libya's banking sector, according to the statement.