CBDC: China’s weapon in the fight against dollarisation

The Chinese central bank’s pilot project to launch a CBDC is in full swing. Now a senior insider comments on the current plans.

The CBDC ambitions of the Chinese central bank have been smouldering in the crypto-cosmos for some time. The digital central bank currency is not only a counter model to the crypto-currency Libra planned by Facebook, but also wants to take up the fight against the spread of the US dollar in China. This was revealed in a statement by a senior official.

At a conference of the Eurasia Forum on 27 October, Mr Zhou Xiaochuan, President of the Chinese Finance Association and former Governor of the People’s Bank of China (PBoC), spoke of the CBDC plans. He made it clear that the motivation of the Chinese central bank is different from that of the other G7 countries. Besides China, these include Canada, France, Germany, Italy, Japan, the UK and the USA. The conference took place online and can be followed afterwards on the YouTube channel of the Magyar Nemzeti Bank.

China distinguishes its plans from those of other G7 countries
However, Xiaochuan did not comment on a counter position to existing or planned crypto currencies. On the contrary, he believes that the other G7 central banks are concerned „with the challenges posed by Libra, Bitcoin and similar digitally encrypted currencies“. However, he says the Chinese central bank’s aim is to focus on domestic payments and to undermine the US dollar’s supremacy there. This is clearly stated in the following quotation.

In China, we have worked very hard to promote DCEP – the digital currency – and electronic payments. But the focus of our approach and its motivation is different from the G7 principle. We [must] prevent dollarisation. This is one of the most important aspects of the Chinese DCEP.

Zhou Xiaochuan, President of the Chinese Finance Association
In fact, the central banks of the other G7 countries have already expressed criticism of the Facebook plans. Experts agree that Libra should not be left a regulatory-free zone.

China’s central bank has already launched a pilot programme to test its digital yuan. It gave away the equivalent of $ 1.5 million to 47,500 people in the city of Shenzhen. This is according to a report by the Chinese news agency Sina Finance. Previously, there had been wild speculation about the actual scope of the pilot project. The deputy governor of the Central Bank, Fan Yifei, revealed some details at the virtual event Sibos 2020. The bank had processed 3.1276 million transactions in the pilot project by the end of August. The total value of these transactions amounts to RMB 1.1 billion (US$162 million).