HONG KONG/SHANGHAI (Reuters) – China’s digital yuan has become the centerpiece of the world’s largest cross-border central bank digital currency (CBDC) trial to date, a report shows. amid rising geopolitical tensions pointing to how China is accelerating efforts to globalize the yuan.
China’s digital currency (e-CNY) is the most issued and actively traded digital currency in a $22 million pilot that uses CBDC to settle cross-border transactions, according to a Bank for International Settlements (BIS) report. It was a token.
The six-week test, which ended late last month, is part of m-Bridge, a project to pilot cross-border payments in digital currencies issued by the central banks of China, Hong Kong, Thailand and the United Arab Emirates. .
The successful completion of large-scale testing comes amid heightened global tensions.
PwC China Senior Economist G. Bin Zhao said:
“This provides a historic window for China to further internationalize the yuan as the US weaponizes the dollar,” he said, adding that e-CNY offers a shortcut.
Russia was kicked out of the dollar system by the West following its February invasion of Ukraine, which Russia called a “special operation.”
At the Communist Party Congress that just concluded, Chinese President Xi Jinping pledged to “reunite” with Taiwan and said China “will not renounce the use of force.”
Washington has warned Beijing that coordinated sanctions against Russia should serve as a warning of what Beijing should expect from its self-governing Taiwan.
Xuan Ding, chief economist for Greater China and North Asia at Standard Chartered (Hong Kong) Ltd., said, “The globalization of the renminbi is a major threat to economic and financial security as it is perceived as a threat from the United States. It has become a necessity rather than a luxury.”
Standard Chartered’s compliant renminbi internationalization tracker hit a new all-time high in July, driven by strong renminbi bond issuance in Hong Kong, the latest data show.
To promote the global use of the renminbi, the People’s Bank of China upgraded its currency swap facility with Hong Kong to a permanent agreement in July, and announced in September that China will set up a renminbi clearing hub in Kazakhstan. agreed.
Russia has seen a surge in the use of the renminbi in international payments since Western sanctions, with a growing number of Russian companies such as Rosneft, Rusal and Polius issuing renminbi bonds.
China is at the forefront of the global race to develop CBDCs, ramping up domestic pilot schemes primarily for retail payments.
PBOC’s participation in m-Bridge represents its ambition to ultimately facilitate the global large-scale use of e-CNY.
A total of 11.8 million yuan ($1.64 million) worth of e-CNY was issued during the test from 15 August to 23 September. each of the other three currencies.
China’s top five state-owned banks, including Bank of China and China Construction Bank, participated in the pilot and settled CBDC on behalf of corporate customers.
The BIS Innovation Hub Hong Kong Center said in a report that given China’s high share of regional trade, the relatively high number of e-CNY issuances “may reflect an increase in demand for renminbi-denominated transactions. ” he said.
Jointly launched by the BIS Innovation Hub and four participating central banks, the m-Bridge project will ultimately build a common platform for efficient, low-cost digital payments to facilitate global trade. We aim to
But the internationalization of China’s renminbi, digital or otherwise, faces challenges amid an economic slowdown ravaged by the resurgence of COVID and the real estate debt crisis.
PwC’s Zhao said: “Whether it’s e-CNY or the renminbi, ultimately China’s national strength will be the deciding factor.
“The renminbi or electronic yuan will only be widely accepted if China’s steady economic development is supported.”
Another headwind is the depreciation of the yuan, which has depreciated by about 12% against the US dollar this year.
“Continued declines due to deteriorating fundamentals could undermine confidence in the currency,” Standard Chartered’s Ding said.
The renminbi’s share as a global payment currency rose for the fifth straight month, but according to international financial message SWIFT, it was 2.44% in September, compared with 42.3% for the US dollar and 35.2% for the euro. remains low. system.
($1 = 7.1952 Chinese Yuan)
Reporting by Georgina Lee and Samuel Shen.Edited by Kim Coghill
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