A former PBoC governor said China is taking a cautious approach to 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 the Chinese central bank (PBoC)
Zhou Xiaochuan, president of China’s Financial Association and former governor of the PBoC, claimed that China’s digital yuan was not intended to replace global fiat currencies like the US dollar and euro, according to the South China Morning Post on Dec. 14 reported .
The Digital Currency Electronic Payment, or DCEP, as China’s digital yuan is also called, is designed purely to facilitate cross-border trade and investment, Zhou said. Zhou compared China’s digital currency to the Facebook cryptocurrency project :
„If you are ready to use it, the yuan can be used for trade and investment. But we are not like Libra and we do not want to replace existing currencies.“
Zhou went on to say that China has learned a lesson from regulatory opposition to the Libra project . Regulators feared the project would damage the financial system and monetary sovereignty.
Zhou said China is taking a more cautious approach:
„Some countries are concerned about the internationalization of the yuan. We cannot press them on sensitive matters 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 of DCEP is that it enables both payments and currency conversions in real time. „If the currency exchange is carried out at the moment of a retail transaction and there is supervision over this exchange, it brings new possibilities for dealing with one another,“ he said.
Zhou also stressed that most cross-border retail payments involving Chinese consumers are already cashless and processed through credit cards or payment services such as Alipay and WeChat Pay. But a digital yuan has additional advantages, such as real-time processing and transparency.
China is actively making progress in its work on its digital currency project . However, some financial experts in other countries have raised concerns that they will be lagging 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 if it were the first to introduce such a currency.