Yuan Gains Ground as Libyan Banks Wire Into Beijing's Cross-Border Payment Network

Libya's central bank has agreed to plug its commercial lenders into China's CIPS network, letting the two nations settle trade in yuan and squeezing the US dollar out of their dealings.

Libya is moving to sideline the US dollar in its foreign trade, striking a deal that plugs its banks straight into China's financial plumbing. The two countries' central banks reached the understanding on Saturday, when Naji Mohammed Issa, Governor of the Central Bank of Libya, and Pan Gongsheng, Governor of the People's Bank of China (PBOC), agreed to link Libyan commercial lenders to China's payment and settlement network. The pact was sealed during Issa's trip to Beijing last week, part of a wider push to rewire trade with the Xi Jinping administration.

During the talks, officials from both sides reviewed how much commerce currently flows between them and mapped out ways to expand it. The centerpiece is Libya's entry into the Cross-Border Interbank Payment System (CIPS), the mechanism that pushes the yuan to the front and steadily trims the dollar's role.

How the yuan replaces the dollar
Once connected, Libyan and Chinese banks will be able to move yuan-denominated payments back and forth directly, without routing money through the third-party intermediary banks that traditionally sit in the middle of cross-border deals. That shift effectively strips the greenback of any function in commerce between the two nations. For Beijing, it lifts the yuan's standing; for Tripoli, it is a step toward spreading out both its economy and its reserves rather than leaning on a single currency.

Letters of credit and a deeper alliance
The two sides also agreed that letters of credit can now be issued directly through Chinese banks. Members of the visiting banking delegation described the arrangement as a "genuine strategic partnership", framing it as something that could reshape how Libya does business. Warmer ties with Beijing also position Libya to tap more money for infrastructure work, an area where China's Belt and Road Initiative (BRI) has grown especially popular across African nations.

Issa said the two central banks discussed opening a fresh phase of strategic cooperation, adding that hooking Libyan commercial banks into CIPS would make cross-border transfers simpler and smoother to carry out.

What this means for you
• For currency watchers: The move feeds the broader de-dollarization trend, which over time can chip away at the dollar's global grip.
• For traders and investors: A bigger role for the yuan in China-linked trade could reshape transaction costs and settlement routes in future deals.

Questions & Answers

1. What deal did Libya and China reach?
Their central banks agreed to link Libyan commercial banks to China's CIPS payment system to reduce reliance on the US dollar.

2. When was the agreement reached?
It was reached on Saturday, during the Libyan governor's visit to Beijing last week.

3. What is CIPS?
CIPS, the Cross-Border Interbank Payment System, is China's mechanism that enables direct cross-border payments in yuan.

4. Which officials signed off on the deal?
Naji Mohammed Issa, Governor of the Central Bank of Libya, and Pan Gongsheng, Governor of the People's Bank of China (PBOC), agreed to it.

5. How does this affect the US dollar?
It effectively removes the US dollar from trade between Libya and China, giving the yuan a bigger role instead.

6. What else could Libya gain from this?
Closer ties with Beijing position Libya to receive more funding for infrastructure projects, including through the Belt and Road Initiative.

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