China is expanding the use cases for its central bank digital currency (CBDC), the digital yuan or e-CNY, in cross-border trades and its Belt and Road initiative. As one of the first CBDCs to be developed and extensively tested, the digital yuan has yet to be officially launched. However, the government has broadened its testing parameters to encompass multiple cities and millions of people.
Digital Yuan Use in Cross-Border Trade
A plan promoting the use of the Chinese digital currency in cross-border trade has been issued in Xuzhou city, a departure point for numerous goods trains headed for Europe. With 18 regular cross-border rail connections from the city to 21 nations in Asia and Europe, Xuzhou serves as a trade hub. The city intends to promote e-CNY use for paying services and storage charges for goods carried by cross-border trains. The experiment plans to extend digital yuan usage for tax and utility services payments in the future.
Jiangsu province has been proactive in promoting digital yuan use cases. Changshu, another city in the province, announced its intention to pay civil servants and public institution employees using digital yuan.
Also Read: Japan, China, and Russia Step Up CBDC Development Efforts
Hong Kong Monetary Authority’s Announcement
In addition to Xuzhou, the Hong Kong Monetary Authority (HKMA) announced that the Guangdong-Hong Kong-Macau Greater Bay Area will be a testing ground for making cross-border payments using digital yuan. HKMA Deputy Chief Executive Darryl Chan said, “The HKMA is working with mainland’s central bank, the People’s Bank of China, to test the digital yuan as a cross-border payment tool in Hong Kong.” Chan added that the HKMA, China, and two other nations are looking into another cross-border project involving Thailand and the United Arab Emirates to “improve efficiency and reduce the cost of cross-border transactions.”
The Chinese government has accelerated its CBDC efforts at a time when international trade markets are shifting away from the standard U.S. dollar. Recently, China has completed multiple trade treaties with countries like Russia and India based on their national currencies rather than the U.S. dollar.
