China’s digital Yuan stands out in cross border pilot in a show global ambition By Stocksak


© Stocksak. FILE PHOTO – People eat at stalls promoting China’s digital yuan (e-CNY) during the 2022 China International Fair for Trade in Services, (CIFTIS), Beijing, China, September 1, 2022. REUTERS/Tingshu Wang


By Georgina Le and Samuel Shen

HONG KONG/SHANGHAI – China’s digital Yuan was the star of the largest cross-border central banks digital currency (CBDC), trial to date. This report shows how Beijing is accelerating yuan globalization efforts in light of rising geopolitical tensions.

    China’s digital currency, or e-CNY, was the most issued, and actively transacted token in the $22 million pilot that used CBDCs to settle cross-border trades, a Bank of International Settlement (BIS) report showed.

    The six-week test, which ended late last month, is part of m-Bridge – a project that pilots cross-border payments in digital currencies issued by central banks of China, Hong Kong, Thailand and United Arab Emirates.

    The successful completion of the large-scale testing comes amid rising global tensions.

    “Many countries around the world, including China, are wary of U.S. financial sanctions,” said G. Bin Zhao, senior economist at PwC China.

    “This provides a historic window for China to promote yuan internationalization as the U.S. weaponizes the dollar,” he said, adding that the e-CNY provides a shortcut.

    Russia was kicked out of the dollar system by the West following its February invasion of Ukraine which Moscow has called “special operations.”    

During the recently concluded Communist Party Congress Chinese President Xi Jinping vowed “reunification” to Taiwan, stating that China doesn’t “renounce the use force.”

Washington warned Beijing that the sanctions it had coordinated against Russia should be used as a warning about what to expect if Beijing moves against Taiwan.

    “The perceived threat from the U.S. … has made globalization more of a necessity than luxury to ensure economic and financial security,” said Shuang Ding, chief economist, Greater China and North Asia at Standard Chartered (OTC:) (HK) Ltd.

    A yuan internationalisation tracker complied by Standard Chartered hit a new high in July, driven by strong issuance of yuan-denominated bonds in Hong Kong, latest data shows.

    To promote global use of the yuan, the PBOC in July upgraded a currency swap facility with Hong Kong to a permanent agreement, and in September, China agreed to set up a yuan clearing hub in Kazakhstan.

    In Russia, use of the yuan in global payments has surged since the western sanctions, and a growing number of Russian companies, including Rosneft, Rusal, and Polyus, have issued yuan bonds.


    China is at the fore of a global race to develop CBDCs, and is ramping up domestic pilot schemes, mainly for retail payments.

    The PBOC’s participation in m-Bridge represents its ambition to eventually promote global, wholesale use of the e-CNY.

    A total of 11.8 million yuan ($1.64 million) worth of e-CNY was issued in the testing between Aug 15. and Sept. 23, and the Chinese currency was used in a total of 72 payment and foreign exchange transactions, far greater than the other three currencies each.

    China’s top five state banks, including Bank of China and China Construction Bank (OTC:), participated in the pilot, settling the CBDCs on behalf of their corporate clients.

    The relatively high number of e-CNY issuances “could reflect greater demand for yuan-denominated transactions”, given the country’s high share of regional trade, the BIS Innovation Hub Hong Kong Centre said in the report.  


    The m-Bridge project, launched jointly by the BIS innovation hub and the four participating central banks, aims eventually to build a common platform for efficient, low-cost digital payment to promote global trade.

    But China’s yuan internationalisation, digital or not, faces challenges amid a slowing economy ravaged by COVID flare-ups, and a property debt crisis.

    “Whether it’s the e-CNY or the yuan, at the end of the day, China’s national strength is the decisive factor,” PwC’s Zhao said.

    “The yuan or e-CNY would be widely accepted only with the endorsement of China’s solid economic development.”

    Another headwind is a slumping yuan, which has lost roughly 12% against the U.S. dollar this year.  

    “Sustained depreciation due to worsening fundamentals could weaken confidence in the currency,” Standard Chartered’s Ding said.

The yuan’s market share as a global payments currency has increased five months in a row, but is still low at 2.44%, compared to 42.3% for U.S. Dollar and 35.2% Euro, according SWIFT.

($1 = 7.1952 renminbi)

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