Checks (notes) Clearing is regarded as an economic operation of clearing funds which are resulted from the checks (notes),deposited with but drawn on each other among the banks in the same city through the clearing house.
The clearing process is as follows: every bank should send the checks (notes) deposited with it but drawn on other banks to the clearing house at a specific time. After offsetting the amount of checks (notes) receivable and that of checks (notes) payable, the banks which have favorable balances will increase their deposits in the People's Bank Of China. On the contrary, the banks which have adverse balances will decrease their deposits in the People's Bank of China.
Every check (note) sent to the clearing house has a receiving bank and a paying bank. The amount of checks (notes) receivable is, of course, equivalent to that of checks (notes) payable. Therefore, at every time of clearing, the total amounts on both sides of the clearing house's balance sheet are always equal.
With the development of computer technology, the clearing houses in some countries have introduced computers to deal with (notes) clearing. It not only saves a great deal of labor, time, and expenses, but also shortens the process of clearing funds and speeds up the circulation of money.