US media: What does China's digital yuan mean to the world?

Source: Global Times

Article on the US Protocol website on October 27, original title: What does the state-backed Chinese digital currency mean to the world? The Chinese government is becoming more and more serious about promoting the research and development of the central bank's digital currency, and the Chinese Bank has carried out digital yuan pilots in major cities. Ultimately, the existence of a state-backed digital yuan could create a large international platform for electronic payments based on blockchain technology. What does this ultimately mean for the rest of the world that still makes most international payments in dollars?

Rebecca Liao, co-founder of blockchain project SKU Chain: China is one of the few countries that firmly believes that technology is becoming more important than money. When issuing the digital yuan, China does not intend to use it directly as a reserve currency to replace the us dollar. Instead, Beijing wants to increase the use of offshore renminbi to slowly adjust the international financial infrastructure centered around the United States and its economic leadership.

Asian trading partners have increasingly tended to use the digital yuan in cross-border payments with Chinese companies because it is convenient and the adaptation process is simpler than traditional financial products.

Robert Green, a Carnegie Endowment for International Peace Scholar: China's efforts at central bank digital currencies could spur the expansion of new cross-border payment infrastructure, depending on whether the digital yuan is compatible with payment systems in other countries. Chinese officials want the digital yuan to enable low-cost cross-border payments, bypassing the bank payment channels that now dominate. The U.S. government can shut down these channels and prevent them from being used by entities sanctioned by the United States. But emerging policy developments may address this problem.

Beijing's 14th Five-Year Plan proposes that China will actively participate in the development of global digital currency standards. China's central bank is leading a technical committee on multilateral central bank digital currency agreements with Thailand and the United Arab Emirates that, if successful, would significantly reduce the cost of cross-border central bank digital currency payments. It is believed that China's success in developing central bank digital currencies may prompt emerging markets to launch China-compatible central bank digital currencies, and the global network of central bank digital currencies with similar structures may eventually help achieve relatively lower-cost payments, thereby weakening the power of US sanctions.

Emily Parker, managing director of digital currency media CoinDesk: The rapid development of the digital yuan has forced other countries to consider doing the same. In this sense, China could help drive the adoption of central bank digital currencies around the world. The U.S. government is acutely aware of China's moves. Fed Chairman Jerome Powell even pointed out that the development of the digital dollar should not be in a race against China, and the United States should slowly make the right decision. But Powell's reference to China suggests that the United States is increasingly unable to avoid the digital yuan when discussing policy. The Fed will soon release a report exploring the risks and opportunities of central bank digital currencies. If it weren't for China's stimulus, would the Fed seriously consider the digital dollar?

Martin Jolzepa, senior fellow at the Peterson Institute for International Economics: Many in Washington, On Wall Street and around the world are concerned that China will be far ahead of the world in launching central bank digital currencies among major powers. Millions of consumers in China are already testing the digital yuan, and it is widely expected that China will expand its use during the Beijing Winter Olympics. However, the international impact of the digital yuan over the next decade is most likely to come from a psychological dimension rather than a real threat to the dominance of the United States or the dollar. China's (at this stage) focus is mainly on the domestic market, that is, gaining control of the financial infrastructure, reducing the cost of payment, and promoting financial inclusion. If the Chinese government wants to compete with the dollar in cross-border transactions or foreign exchange reserves, it will need to accomplish two daunting tasks: first, it needs to loosen strict restrictions on capital flows; second, to be truly faster and cheaper than the current dollar system, it needs to build a huge ecosystem around the digital yuan. (By David Watham, translated by Zhang Wang)