Beijing to test-run digital Yuan
Picture: Aleksandra Sova
The Chinese cities of Beijing and Suzhou will gift a combined $6.2 million of digital currency to some of its residents today in the latest trial of the central government’s digital yuan program.
The digital currency, known as the e-yuan, is designed to wholly replace traditional coins and banknotes as a means of payment. Benefits of a central digital currency include greater traceability of payments and stronger enforcement against illegal financing. A date for an official widespread release of the e-yuan has not been announced; however, the government is motivated to do so before the 2022 Winter Olympics in Beijing.
The e-yuan is part of the Chinese Communist Party’s broader ambitions of internationalising the yuan and creating a payment system independent of the US financial system. After domestic adoption, Southeast Asian states will likely be the first international partners, as central banks in Thailand and Hong Kong are reportedly cooperating on a similar system. Using the e-yuan to settle trade balances and yuan-denominated bonds will strengthen China’s regional sphere of influence and induce neighbours to be more financially dependent. Expect additional domestic e-yuan trials in the medium-term as Beijing looks to refine the program and generate domestic support.
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