A former PBoC governor said China is taking it easy with the digital yuan for now.
The Chinese government does not want to replace existing fiat currencies with its own digital currency, according to a former governor of China’s central bank (PBoC).
Zhou Xiaochuan, president of the China Finance Association and former governor of the PBoC, claimed that China’s digital yuan is not intended to replace global fiat currencies such as the US dollar and the euro, the South China Morning Post reported on 14 December.
The Digital Currency Electronic Payment, or DCEP, as China’s digital yuan is also known, is purely designed to facilitate cross-border trade and investment, Zhou said. Zhou compared China’s digital currency to the Facebook cryptocurrency project:
„If you are willing to use it, the yuan can be used for trade and investment. But we are not like Libra and we don’t want to replace existing currencies.“
Zhou went on to explain that China had learned a lesson from regulatory resistance to the Libra project. Regulators feared that the project would harm the financial system and monetary sovereignty. Zhou said China was taking a more cautious approach:
„Some countries are concerned about the internationalisation of the yuan. We cannot push them on sensitive issues and we cannot impose our will on them. We must avoid the impression of great power chauvinism.“
Zhou noted that one of the main advantages with the DCEP is that it allows both payments and currency conversions in real time. „If the currency exchange is realised at the moment of a retail transaction and there is oversight of that exchange, it brings new opportunities for interaction,“ he further explained.
Zhou also pointed out that most cross-border retail payments involving Chinese consumers are already done cashless and via credit cards or payment services such as Alipay and WeChat Pay. But a digital yuan has additional advantages, he said, such as real-time processing and transparency.
China is actively making progress on its digital currency project. However, some financial experts in other countries have expressed concerns that they would lag behind in developing their own central bank digital currencies. In October 2020, Japan’s vice-finance minister for international affairs warned the global community about the potential risks of China’s digital yuan. He also said there was a risk that China could gain an advantage by being the first country to release such a currency.