SWIFT Explained: Its Function and Real Significance in Global Finance
SWIFT, the Society for Worldwide Interbank Financial Telecommunication, plays a central role in the modern global financial system by enabling secure and standardized communication between banks and financial institutions. Its core function is to transmit payment instructions and other financial messages across borders with speed and reliability. Importantly, SWIFT itself does not move, clear, or settle money. Those processes are carried out by separate clearing and settlement systems operated by central banks and financial institutions. In this sense, SWIFT can be understood as the communication infrastructure of international finance—much like a network cable that connects institutions and allows instructions to flow, while the actual transfer of value happens through other channels.
This distinction helps clarify several common misconceptions about SWIFT’s power and limitations. Being excluded from SWIFT does not automatically sever a country’s ability to conduct international trade or financial transactions. Alternative mechanisms—such as direct bank-to-bank arrangements, regional payment systems like China’s CIPS, or other non-SWIFT messaging and settlement solutions—can and do fill the gap. The true leverage associated with SWIFT lies less in the system itself and more in the broader framework of U.S.-led sanctions and regulatory reach, which discourages global banks from dealing with targeted entities. Even so, countries facing SWIFT restrictions, including Russia and Iran, have continued to engage in cross-border trade by adapting their financial channels. Understanding SWIFT’s role, therefore, requires seeing it not as a global payment engine, but as a critical messaging backbone whose influence depends heavily on the legal and political environment surrounding it.
China’s Financial Readiness: CIPS and the Rise of the Digital RMB
China has steadily developed alternative financial infrastructure to reduce reliance on traditional Western-dominated payment networks, most notably through the Cross-Border Interbank Payment System (CIPS) and the digital renminbi (e-CNY). Launched in 2015, CIPS is designed to support cross-border RMB clearing and settlement, providing a functional substitute for established international messaging and settlement arrangements. Alongside this, China has invested in backup settlement and messaging systems intended to ensure continuity of cross-border payments even under adverse geopolitical conditions, including scenarios where access to SWIFT might be constrained.
The digital RMB further strengthens this preparedness by introducing a fast, secure, and technologically advanced payment mechanism. Built on distributed ledger concepts, the digital RMB enables near-instant settlement, significantly shortening transaction times compared to traditional correspondent banking and sharply reducing transaction costs. When combined with China’s broader technological ecosystem—including blockchain applications, the BeiDou satellite navigation system, and advances in quantum communication—this infrastructure enhances the efficiency, resilience, and security of international trade settlements.
China’s strategic position in global trade amplifies the significance of these systems. As the largest trading partner for more than 150 countries, China possesses substantial leverage to encourage or require the use of RMB-based settlement channels such as CIPS in bilateral and multilateral trade. This combination of scale, technology, and alternative financial infrastructure places China in a strong position to sustain cross-border commerce and promote the international use of its currency, even in a fragmented or sanction-prone global financial environment.
The Global Economic Landscape and the Limits of Financial Centralization
Any assessment of today’s global economic context must begin with China’s central position in international trade and manufacturing. China has emerged as the world’s largest manufacturing hub, accounting for a substantial share of global industrial output and anchoring many of the world’s most important supply chains. Its ports dominate global shipping rankings, and its trade relationships span every major region. For a wide range of economies—including major industrial and resource-exporting countries—China functions simultaneously as a key export destination and a primary source of imports, making it deeply embedded in the daily mechanics of global commerce.
Within this broader context, the prominence of SWIFT reflects historical adoption and institutional trust rather than clear technical superiority. While SWIFT remains the most widely used financial messaging network, it is not the only option. Regional and national alternatives already operate at scale, such as Europe’s SEPA, the Gulf Payment System (AFAQ), Africa’s PAPSS, and China’s CIPS serving mainland China and Hong Kong. These systems demonstrate that global finance is more fragmented and adaptable than often assumed, with multiple parallel infrastructures capable of supporting cross-border transactions.
The experience of Russia since 2022 further illustrates this reality. Despite being excluded from SWIFT, Russia continued to export oil and gas by relying on alternative settlement channels, including its domestic SPFS system and China’s CIPS. While exclusion from SWIFT increased friction and costs, it did not halt trade outright. Taken together, these dynamics highlight a global economic environment in which financial connectivity is no longer dependent on a single network. Instead, trade and payments increasingly reflect a multipolar system shaped by economic scale, regional integration, and the growing availability of alternative financial infrastructures.
Implications for China’s Domestic Economy in a Shifting Financial Order
In assessing the potential impact on China’s domestic economy, the most immediate effects would likely be limited and manageable. In the short term, transactions involving certain foreign banks could experience delays, higher compliance costs, or added complexity, particularly in cross-border remittances and settlements denominated in foreign currencies. These frictions would primarily affect firms and financial institutions with heavy exposure to Western banking networks. However, China’s internal financial system is structurally insulated from such disruptions, as domestic transactions between Chinese banks do not rely on SWIFT. As a result, core domestic economic activity—payments, lending, and internal settlement—would remain largely unaffected.
Over the longer term, external pressure could act as a catalyst for structural change rather than a source of systemic weakness. Constraints on traditional channels may accelerate the international adoption of China’s own payment infrastructure, including CIPS and the digital renminbi, reinforcing their role in trade and financial settlement. This shift would support China’s broader objective of reducing dependence on the U.S.-dollar-centric financial system and increasing monetary and financial autonomy. At the institutional level, such developments could also reshape internal policy dynamics, strengthening nationally oriented approaches to financial governance and reducing the influence of factions favoring deep reliance on Western financial systems. In this sense, the long-term impact may be less about economic damage and more about strategic realignment within China’s domestic financial architecture.
Global and U.S. Economic Implications of Financial Exclusion Strategies
Any attempt to exclude China from core international financial mechanisms would carry significant risks for the United States and the global economy as a whole. U.S. banks and multinational corporations remain deeply intertwined with China through trade, investment, and supply chains, and disrupting these links would generate financial losses and operational instability. Moreover, the international role of the U.S. dollar depends on confidence in an open, rules-based system. Actions perceived as weaponizing financial infrastructure against an economy as large and central as China could undermine that confidence, with potentially far-reaching consequences for global liquidity and financial stability.
From a strategic perspective, the situation is marked by mutual constraints rather than unilateral leverage. China has been one of the largest beneficiaries of the existing international financial architecture—an architecture originally shaped under U.S. leadership—by integrating deeply into global markets and institutions. Efforts by the United States to forcibly exclude China would therefore risk not only economic backlash but also reputational damage, raising questions about the durability and neutrality of the system itself. In practice, both countries face a strategic stalemate: neither can afford to dismantle or radically disrupt the prevailing rules without incurring enormous economic and political costs. This interdependence underscores the fragile balance at the heart of the current global economic order.
Strategic Finance in a Multipolar Geopolitical Environment
From a geopolitical and financial strategy perspective, efforts by BRICS countries to develop SWIFT-like settlement mechanisms reflect a broader push to reduce dependence on the U.S. dollar and dollar-centered infrastructure. China has emerged as the central driver of this process, using its extensive global trade relationships and the operational capacity of CIPS to anchor alternative settlement channels. As these mechanisms mature, they are likely to accelerate de-dollarization and the internationalization of the renminbi, contributing to the emergence of multi-currency settlement systems rather than a single dominant financial axis.
In this strategic context, extreme measures such as excluding China from SWIFT could prove counterproductive. Such an action could paradoxically compel trading partners to adopt China-led settlement systems at scale, thereby weakening SWIFT’s relevance and influence. This dynamic mirrors earlier cases in which U.S. sanctions—whether financial measures against Russia or technology restrictions on China—stimulated the rapid development of domestic alternatives. The broader lesson is that financial coercion, when applied to large and systemically important economies, can accelerate the very structural shifts it is intended to prevent.
Technological Foundations of Next-Generation Payment Systems
From a technological perspective, emerging payment infrastructures highlight a sharp contrast with traditional financial messaging and settlement models. Conventional cross-border transfers routed through systems like SWIFT often require several days to complete, reflecting multiple intermediaries and reconciliation steps. By comparison, digital currency–based settlement systems, such as the digital RMB, are designed for near-instant execution, with cross-border transactions potentially completed in seconds and at a fraction of the cost. The resulting gains in speed and efficiency significantly reduce liquidity lock-up and transaction fees, reshaping expectations around how international payments should function.
Equally important are advances in security and compliance. Distributed ledger technology enables built-in traceability, automated fraud prevention, and real-time compliance with anti–money laundering requirements, reducing reliance on post-transaction checks. These capabilities also allow seamless integration with large-scale trade and infrastructure initiatives, including cross-border logistics and development corridors, where faster and more transparent settlement can materially improve trade efficiency. Taken together, these technological considerations suggest that future financial systems will be defined less by legacy networks and more by digital architectures optimized for speed, security, and systemic resilience.
Summary & Implications
Excluding China from SWIFT would not be catastrophic, as technical alternatives like CIPS, the digital RMB, and emerging BRICS settlement systems provide viable channels for international transactions. China’s position as a global manufacturing and trading powerhouse further insulates it from financial isolation, while SWIFT’s influence is primarily political—reinforced through U.S. sanctions—rather than based on any technological superiority. Strategically, China is actively preparing for a multipolar financial future, positioning its payment infrastructure and currency for broader international adoption. At the same time, the United States faces a complex dilemma: attempting to force China out risks self-inflicted economic losses, destabilizing the global financial system, and potentially accelerating the very shift toward a multi-currency architecture that includes the renminbi, the dollar, and the euro. This dynamic underscores a strategic balance in which financial power and geopolitical leverage are deeply interconnected.