According to local media reports, China is planning to expand the use cases of its central bank digital currency (CBDC) a level higher. The trial will now involve its Belt and Road initiative and cross-border trades.
China’s Belt and Road Initiative is a strategy initiated by the country that seeks to connect Asia with Africa and Europe via land and maritime networks with the aim of improving regional integration, increasing trade, and stimulating economic growth.
Reportedly, the plan promoting the use of the Chinese digital currency i.e. digital Yuan in cross-border trade was issued in Xuzhou city. The city serves as the departure point for numerous goods trains from China headed for Europe.
Notably, there are 18 regular cross-border rail connections from the city to 21 nations in Asia and Europe. The digital Yuan also known as digital RMB has been one of the first CBDCs to be developed and widely tested.
While there hasn’t been an official launch, the government has expanded its testing parameter to include multiple cities and millions of people. Xuzhou is a trade hub and plans to promote e-CNY use to pay for services and storage charges for goods carried by cross-border trains.
The experiment plans to extend digital Yuan usage to pay taxes and utility services in the city in the future. While all the Chinese provinces are progressively moving towards CBDC adoption, Jiangsu province in particular has been quite proactive in promoting digital yuan use cases. Recently, Changshu, another city in the province, announced it will pay salaries of civil servants and people working for public institutions using digital Yuan.
According to the data released by the People’s Bank of China (PBoC), the “popularity” of mobile payments reached the 90% mark last year. The PBoC has begun cross-border pilots with Hong Kong and Macau, which will allow Beijing to test the CBDC in international markets. Although Hong Kong is officially part of China, it retains a separate economic system.
This system is linked to Western and other Asian economies. Macau also has a separate currency and economic system. The Hong Kong Monetary Authority (HKMA) announced that Guangdong-Hong Kong- Macau Greater Bay Area will be a testing ground for making cross-border payments using digital Yuan. Darryl Chan, HKMA deputy chief executive said:
The HKMA is working with the mainland’s central bank, the People’s Bank of China, to test the digital yuan as a cross-border payment tool in Hong Kong.
Additionally, Chan said that another cross-border project involving Thailand and the United Arab Emirates was being looked into by the HKMA, China, and two other nations in order to “improve efficiency and reduce the cost of cross-border transactions”.
Notably, the Chinese government has intensified its CBDC efforts at a time when the international trade markets are looking forward to ending the dominance of the U.S. Dollar. Recently, China has completed multiple trade treaties with the likes of Russia and India based on their national currency over the U.S. Dollar.
The development of CBDC in China has been one of the fastest as Chinese cities are found to be rapid in their adoption of CBDCs and are in complete support of the nation’s CBDC project.
Changsha, another Chinese city, has seen significant progress in CBDC adoption, with more than 420,000 merchants accepting payments in the digital Yuan. According to officials, the city has 22 million digital yuan wallets, and 800,000 “public” wallets have been opened for use by firms and government organizations based in Changsha.
Several cities had announced huge giveaways to boost the adoption in their respective regions. Todayq News reported that the Suzhou authorities aim to achieve the goal of digital Yuan transactions involving residents and enterprises, with the targeted value projected to grow six-fold.