The system will provide capital settlement and clearing services for cross-border yuan transactions for financial institutions in China and abroad, according to state-owned news agency Xinhua.
This will improve efficiency and will increase the use of the yuan globally by cutting costs and processing time, Yan Yifei, president of the People's Bank of China said, China's central bank, according to Xinhua.
Until now, cross border trading has had to be managed through offshore yuan clearing banks in Hong Kong, London or Singapore, or with the help of a bank on the Chinese mainland, the report said.
CIPS has been developed by, and will be run by, the central bank. Participants outside china will be will be able to clear yuan transactions with Chinese counterparts from 9am to 8pm Bejing time on any working day. CIPS will use a coding format "in line with international practice", Xinhua said.
The central bank announced last month that it would open up its yuan-denominated bond market to two international commercial banks for the first time. This will broaden the channels available for international banks and promote further opening of China's bond market as well as increasing cross-border use of the yuan, the bank said.