However, China’s currency internationalization is a wholly government-driven process. The internationalization of the dollar and the euro was aided by the countries’ open and liberalized economies, an important prerequisite for reserve currencies. Comparatively, the Chinese financial system is far more restrictive, perhaps more restrictive than that of any other country that has aspired to internationalize its currency. The financial crisis in 2008 represented the failure of a Western-dominated financial world order. It pushed China to attempt to retain its autonomy over capital movements and key financial variables. As a result of the crisis, China began to set up the building blocks that could enable it to gradually reduce its dependency on the U.S. dollar.
Many central banks, including the Reserve Bank of Australia, are mulling their own digital currencies to be issued alongside regular money. Now, 18 months down the track, Facebook’s plans are stalled and China has the most robust central bank digital currency (CBDC) in the world. The clearest evidence that the PBOC is considering using the digital yuan for international trade comes from the Hong Kong Monetary Authority. Their recent m-CBDC project with the BIS innovation labs, UAE, Thailand and PBOC shows what an interoperable CBDC future might look like. Many analysts believe this project signals China’s intent to provide a viable alternative to U.S. dollar-based trade settlement processes.
The Bank of England was the first to propose a Central Bank Digital Currency, but China is the first to launch one. Other nations, including Canada, India, Singapore, Sweden, Thailand, Uruguay and the United States are exploring the feasibility of creating a central bank-issued digital currency. A mobile phone app developed for the People’s Bank of China allows users to spend it like cash. It’s being tested by about 100,000 people, and it’s not clear when it will be generally available to China’s 1.4 billion citizens. At this juncture in world politics, it is especially important to examine the ways in which China—the Eastern center of power—plans to assert its dominance and challenge the United States’ power.
In addition, the institutions that issue the currency to users are required to meet compliance regulations with payment rules such as capital controls and sanctions. China hopes to gain an advantage in the digital currency space even as central bankers globally have been skeptical about moving forward with their digital currencies. Their main concerns center around financial stability and privacy because governments would have access to the daily transactions of users.
However, due to their ubiquity and innovation ability, Alipay and WeChat Pay have managed to maintain their dominant position. In addition, the central bank is aware that it must depend on more than commercial banks to expand the use of e-CNY. Hence integrating with WeChat and Alipay is key to growing the user base for e-CNY.
Several efforts are also under way to develop alternatives to the supremacy of the SWIFT network, which is essentially the plumbing for cross-border financial flows. The United States repeatedly threatens countries with sanctions that would disconnect them from the SWIFT network. Successfully riding the digitalization tide in 2021 is the Chinese yuan, which is attracting more users to its digital version. Up to 75 per cent of China’s foreign reserves are believed to be held in US dollar denominated assets. Cryptocurrency author David Gerard said the DC/EP rollout has been partly prompted by anxiety within China’s government over WeChat and Alipay’s monopoly. And the DC/EP could become a new tool for the Chinese Communist Party (CCP) to monitor and control its people, and its already heavily regulated financial systems, even more.
According to the People’s Bank of China, the country’s central bank, more than 140 million personal digital wallets for e-CNY have been created and another 10 million company digital wallets were opened as of Oct 22. More than 150 million transactions have been made via digital wallets, with the total transaction value approaching 62 billion yuan ($9.73 billion). While the Central Bank desires scalability and increased adoption of e-CNY, people need more incentive to switch from popular digital wallets such as WeChat and Alipay.
Additionally, establishing card payments involved connecting consumers to banking infrastructure, which required setting up physical banks in remote corners of the world and enabling people’s access to those banks. China’s central bank has plans to roll out a digital yuan, which could circumvent the U.S. dollar in important global financial transactions. Here are some ways the digital yuan could pose a challenge to the dollar’s prominence. But the PBOC has begun laying the ground work for digital currency to be used in cross-border transactions.
The Alliance for Automotive Innovation, a Washington-based trade group, said the semiconductor shortage could reduce production by 1.3 million vehicles. Chip shortages have disrupted production at nearly every major automaker, including Honda, Toyota and Volkswagen. According to the Pew Research Center, 7% of Americans say they don’t use the internet. For Black Americans, that rises to 9%, and for Americans over the age of 65, that rises to 25%. Americans with a disability are about three times as likely as those without a disability to say they never go online.
