“Beijing would like to replace the trillions of dollars of foreign reserves in U.S. currency and the euro with its own currency, yielding a monetary windfall for Beijing and encouraging trade in yuan, which would encourage trade with China,” said Corr.
“World foreign currency reserves are currently over $7 trillion in U.S. currency and over 2 trillion in the euro,” he said. “If Beijing were to achieve hegemony, all of that currency would likely become worthless, and those holding it would gradually lose value.” Corr said the result would be high inflation of the dollar and euro, plus international holders dumping them back on their currencies’ home countries.
In January, China’s central bank launched the e-CNY app for users in 11 regions and cities across the country, including the 2022 Olympic venues.
A vegetable store supports digital yuan payment in Shanghai. Photo: Qi Xijia/GTChinese economists have refuted some overseas economists’ allegation that the use of the digital yuan is a threat, saying China’s currency reform won’t bring fundamental change to global finance, although it may lead to less dominance of the US dollar.
Starting from Wednesday, passengers in Beijing are allowed to use digital yuan to pay for subway commute, one day after a subway line in East China’s Suzhou city began accepting digital yuan.
These are the latest trials rolled out by the Chinese government to apply digital yuan to real-life scenarios, including issuing digital yuan “red packets” to city residents and testing the currency’s usage at some vending machines.
Chinese people once relied on fully centralized currency in the form of grain‐ration coupons to buy rice, flour, cooking oil, and daily necessities amid the planned economy days under the Mao era. Such coupons issued from the 1950s—which strictly limited people’s choice of when, where, and what to purchase—were only abolished in the 1990s.
The QR payment code for Wechat Pay (R) beside a book about Chinese President Xi Jinping, titled “Xi Jinping; The Governance of China,” at a news stand in Beijing on Sept. 18, 2020. (Greg Baker/AFP via Getty Images)
“Once the digital currency is implemented,” said the researcher, who preferred to remain anonymous due to security concerns, “[it will] only upgrade the control by coupons to currency. And people will bear no privacy.”
In a letter sent to President Joe Biden in January, Sen.
Beijing digital currency push winter visage
As China’s debut of its digital currency draws to a close in tandem with the 2022 Winter Olympics, the regime’s crypto ambitions remain in place. Experts warned of the Chinese Communist Party’s centralized control, both at home and abroad.
A digital currency will empower the regime’s control over its populace, especially dissenters, as all future financial transactions would leave an easy-to-monitor, digital paper trail. The Olympic games may have functioned as a staging ground for foreign individuals from around the world to adopt China’s digital currency.
The country has been developing a digital form of its sovereign currency since 2014, issued by its central bank, the People’s Bank of China (PBOC).
Beijing digital currency push winter visan
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The concept of digital currency — or a digital version of cash controlled by a private key — was created more than a decade ago, with the launch of Bitcoin.
Today, fiat-backed digital currencies, commonly referred to as “stablecoins,” have emerged as a promising new payment innovation, combining the benefits of digital currencies with the stability of existing currencies like the US dollar.
Beijing digital currency push winter visas
Hector Retamal/AFP via Getty Images)
Even so, such overseas payments are still processed domestically in China, independent economist Gong Shengli told the Chinese-language Epoch Times on Feb. 15.
“It does not equal the internationalization of the RMB, which has no international payment capacity,” he said, given that China’s yuan currency is not yet fully convertible, or not being able to move freely in and out of China. “Whether in the United States, Europe, or elsewhere, it’s just the internal circulation of RMB.”
However, observers still spotlight its potential to subvert the dominance of the U.S. dollar in the long run, especially when it allows countries sanctioned by the United States, such as Iran, North Korea, and Afghanistan, to conduct more business with China.
Yi Gang, the governor of the central bank, said on Feb.
“I believe that the world’s financial system will become more pluralistic, and settlement of currencies will become more varied, with reforms not just for the yuan but also the euro and yen,” Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times.
Wang Jiaojiao, director of the think tank trade development department under the Alliance of Belt and Road Business Schools, told the Global Times that digital yuan could weaken the US dollar’s role in global currency settlements because of the US Fed’s excessive money printing, not China’s currency reforms. However, it seems impossible for the yuan to totally replace the US dollar’s dominant role in the foreseeable future, she said.
“However,” said Corr, “one of the main attractions for a privacy-minded public in supporting and purchasing cryptocurrency like Bitcoin, is that it is hard for governments to track.”
“And so the uptake of the e-CNY is unlikely outside of China’s borders unless it manages to become hegemonic and force people and countries globally to use its currency.”
That is exactly what the regime plans to do.
China will strengthen its cross-border yuan payments system and explore setting up infrastructure standards for a digital fiat currency as part of a five-year plan for financial standardization.
The plan, to be implemented during the 2021–2025 period, was published by four regime agencies including China’s central bank and the securities watchdog earlier this month, but was dated Nov.
Currently, the programs are underway in 12 cities, including Beijing and Hebei Province’s Zhangjiakou, where Winter Games venues are situated.
China, however, is struggling to increase the number of e-CNY users. The cumulative amount of digital yuan transactions was 87.5 billion yuan (about ¥1.6 trillion) at the end of 2021, but this was only 0.02% of the transaction value of mobile payment services in 2020.
During the Games, e-CNY use in Beijing has been limited to areas inside the bubble, such as Olympic venues, as well as certain stores and designated services.
The WeChat messaging app and Alipay, which handles asset management, have established payment apps that are essential to daily life in China.
From purchasing luxury goods to ride-hailing, Chinese citizens can now use Alipay and WeChat to make electronic payments outside of China by showing a QR code on their phones. U.S. merchants accepting China’s cashless mobile payments system can also reach Chinese customers at their stores in China.
The two dominant virtual wallet systems in China, taking up over 90 percent of the domestic mobile payments market, also announced they are teaming up with the digital yuan.
China’s biggest messaging and payment app WeChat said in January it will support the digital yuan. Its mobile payment and e-wallet service WeChat Pay has over 800 million active monthly users.
Alipay, with more than 1 billion users, began trialing digital yuan payments last year.
Alipay (L) and WeChat (R) QR payment codes displayed at a market in Shanghai on Oct. 27, 2020.