The first phase of China International Payment System (CIPS) was officially launched Thursday in Shanghai, a milestone in the internationalization of the Chinese currency, the renminbi or yuan.

The system, which provides capital settlement and clearing services for cross-border yuan transactions for financial institutions domestically and abroad, will enhance efficiency and increase global use of the Chinese currency by cutting costs and processing times, said Fan Yifei, vice president of the People's Bank of China, the central bank.

Previously, cross-border yuan clearing had to be done either through one of the offshore yuan clearing banks in places like Hong Kong, Singapore and London, or else with the help of a corresponding bank on the Chinese mainland.

CIPS will have a significant role in shoring up China's real economy and promoting the "going abroad" strategy of domestic enterprises, said Fan.

Developed and administered by the central bank, CIPS enables market participants outside China to clear yuan transactions with their Chinese counterparts directly from 9 a.m. to 8 p.m. Beijing time during any working day under a coding format in line with international practice.

China's yuan became one of the world's top five payment currencies in November 2014, overtaking the Canadian dollar and the Australian dollar, according to global transaction services organization SWIFT.

China has accelerated the pace of yuan internationalization in recent years. The central bank designated 10 official yuan clearing banks last year, bringing the total to 14 globally that can clear yuan transactions with China.