Chinese economists said that the use of the digital yuan won't bring fundamental changes to global finance, although it may lead to reducing the dominance of the U.S. dollar. Since June 30, subway passengers in Beijing are allowed to use digital yuan to pay for their fares, one day after a subway line in Suzhou city began accepting digital yuan. Users need to download a mobile app and link it with an Industrial and Commercial Bank of China (ICBC) bank account that has a digital RMB balance to access the service in subways.
These are the latest trials rolled out by the Chinese government to apply digital yuan to real-life scenarios, including issuing digital yuan “red packets” to city residents and testing the currency's usage at some vending machines. Liu Dian, Associate Research Fellow at the Chongyang Institute of Renmin University of China, said that the use of the digital yuan will expand from sporadic retail scenarios to broader applications, including cross-border payments. “For example, the digital yuan will be used in large-scale cross-border payments for the first time during the 2022 Beijing Winter Olympics,” Liu told the Global Times. According to e-commerce firm JD, between December 11 and June 18, up to 450,000 users spent more than CNY100 million in digital form on its platform, the China Daily adds.
Many countries are worried that their currencies' international role could weaken amid the rise of foreign digital currencies. European Central Bank Governing Council Member Francois Villeroy de Galhau said that China's rapid progress in developing the digital yuan poses a risk to the euro's monetary sovereignty. He urged European policymakers to accelerate their own digital currency plans. China has taken the lead in developing a digital currency, given the country's rapid development of informatization industries such as 5G, e-commerce and social network platforms that provide a myriad of application scenarios. But the country still needs to do more research on digital currency technologies to reinforce its advantages. However, experts don't expect any digital currency to significantly change the global financial system any time soon.
Experts stressed that the rise of digital currencies would diversify the global currency system, as many small economies want to shake off reliance on the U.S. dollar with the help of new technical methods, such as currency digitalization. “I believe that the world's financial system will become more pluralistic, and settlement of currencies will become more varied, with reforms not just for the yuan but also the euro and yen,” Wang Peng, Assistant Professor at the Gaoling School of Artificial Intelligence of Renmin University of China, told the Global Times. Wang Jiaojiao, Director of the Trade Development Department under the Alliance of Belt and Road Business Schools, told the Global Times that the digital yuan could weaken the U.S. dollar's role in global currency settlements but would not totally replace the U.S. dollar's dominant role in the foreseeable future.
