Page 322 - 2023 White Paper on the Business Environment in China
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3 White Paper on the Business Environment in China
will be translated into new business models and by COVID flare-ups, and a property debt crisis.
market opportunities (Shi). Whether it's the e-CNY or the yuan, at the end of the
day, China's national strength is the decisive factor.
China's digital currency was the most issued, and The yuan or e-CNY would be widely accepted only
actively transacted token in the US$22 million pilot with the endorsement of China's solid economic
that used Central bank digital currencies (CBDCs) development. Another headwind is a slumping
to settle cross-border trades. The six-week test that yuan, which has lost roughly 12% against the U.S.
started in September 2022 was part of m-Bridge dollar in 2022. Sustained depreciation due to
- a project that pilots cross-border payments in worsening fundamentals could weaken confidence
digital currencies issued by central banks of China, in the currency (Shen and Lee).
Hong Kong, Thailand and United Arab Emirates.
The successful completion of the large-scale It has been speculated for years that the
testing comes amid rising global tensions. "Many internationalized renminbi, buttressed with the
countries around the world, including China, are rolling out of the digital yuan (e-CNY) domestically,
wary of U.S. financial sanctions," said G. Bin Zhao, will combine to fuel the momentum for the RMB
senior economist at PwC China. "This provides to disrupt the dollar’s hegemony, at least along
a historic window for China to promote yuan the Belt and Road countries. When food delivery
internationalization as the U.S. weaponizes the personnel could show “transaction succeeded”
dollar," he said, adding that the e-CNY provides on their smartphone displays in the booming
a shortcut. A yuan internationalization tracker Guangdong-Hong Kong-Macao Greater Bay Area
complied by Standard Chartered hit a new high during lockdown in 2022, the PBOC benefited from
in July 2022, driven by strong issuance of yuan- the success of being at the forefront in digitalization.
denominated bonds in Hong Kong. To promote Central banks worldwide are implementing digital
global use of the yuan, the PBOC in July upgraded solutions to improve the efficiency of the financial
a currency swap facility with Hong Kong to a system. Among the G20 members, 19 out of 20
permanent agreement, and in September 2022 are exploring the idea of a central bank digital
China agreed to set up a yuan clearing hub in currency, with 16 already in the development or
Kazakhstan. In Russia, use of the yuan in global pilot stage. The PBOC, however, tested the water
payments has surged since the western sanctions, as early as 2014 when several other countries
and a growing number of Russian companies, lagged far behind in the research and planning
including Rosneft, Rusal, and Polyus, have issued phase. Some columnists maintain China’s early
yuan bonds. China is at the fore of a global race to development will allow it to internationalize the
develop CBDCs, and is ramping up domestic pilot RMB and disrupt the US dollar’s hegemony. China
schemes, mainly for retail payments. The PBOC's is streets ahead in terms of digital payments and
participation in m-Bridge represents its ambition the digital yuan doesn’t disrupt existing ways to pay
to eventually promote global, wholesale use of the (with QR codes and face payments already being
e-CNY. A total of 11.8 million RMB (US$1.64 million) widely used in China through Alipay and WeChat
worth of e-CNY was issued in the testing between Pay). However, the biggest innovation is its ability to
Aug 15. and Sept. 23, and the Chinese currency use smart contract technology. The GBA, especially
was used in a total of 72 payment and foreign the Hong Kong Special Administrative Region,
exchange transactions, far greater than the other boasts inherent advantages in the development of
three currencies each. China's top five state banks, blockchain technology. Through smart contracts,
including Bank of China and China Construction users can agree on the use time, use scope and use
Bank, participated in the pilot, settling the CBDCs rules: nontransferable, nonredeemable, time-out
on behalf of their corporate clients. The m-Bridge recovery, targeted use, targeted crowd, targeted
project, launched jointly by the BIS innovation scene, consumer welfare, coupon reduction,
hub and the four participating central banks, aims designed merchant consumption, etc. The e-CNY
eventually to build a common platform for efficient, provides many other advantages: no interest,
low-cost digital payment to promote global trade. low cost, payment and settlement, controllable
But China's yuan internationalization, digital or not, anonymity, security, dual offline payment, etc.
faces challenges amid a slowing economy ravaged Alipay, WeChat, and bank wallets remain the same,
322
will be translated into new business models and by COVID flare-ups, and a property debt crisis.
market opportunities (Shi). Whether it's the e-CNY or the yuan, at the end of the
day, China's national strength is the decisive factor.
China's digital currency was the most issued, and The yuan or e-CNY would be widely accepted only
actively transacted token in the US$22 million pilot with the endorsement of China's solid economic
that used Central bank digital currencies (CBDCs) development. Another headwind is a slumping
to settle cross-border trades. The six-week test that yuan, which has lost roughly 12% against the U.S.
started in September 2022 was part of m-Bridge dollar in 2022. Sustained depreciation due to
- a project that pilots cross-border payments in worsening fundamentals could weaken confidence
digital currencies issued by central banks of China, in the currency (Shen and Lee).
Hong Kong, Thailand and United Arab Emirates.
The successful completion of the large-scale It has been speculated for years that the
testing comes amid rising global tensions. "Many internationalized renminbi, buttressed with the
countries around the world, including China, are rolling out of the digital yuan (e-CNY) domestically,
wary of U.S. financial sanctions," said G. Bin Zhao, will combine to fuel the momentum for the RMB
senior economist at PwC China. "This provides to disrupt the dollar’s hegemony, at least along
a historic window for China to promote yuan the Belt and Road countries. When food delivery
internationalization as the U.S. weaponizes the personnel could show “transaction succeeded”
dollar," he said, adding that the e-CNY provides on their smartphone displays in the booming
a shortcut. A yuan internationalization tracker Guangdong-Hong Kong-Macao Greater Bay Area
complied by Standard Chartered hit a new high during lockdown in 2022, the PBOC benefited from
in July 2022, driven by strong issuance of yuan- the success of being at the forefront in digitalization.
denominated bonds in Hong Kong. To promote Central banks worldwide are implementing digital
global use of the yuan, the PBOC in July upgraded solutions to improve the efficiency of the financial
a currency swap facility with Hong Kong to a system. Among the G20 members, 19 out of 20
permanent agreement, and in September 2022 are exploring the idea of a central bank digital
China agreed to set up a yuan clearing hub in currency, with 16 already in the development or
Kazakhstan. In Russia, use of the yuan in global pilot stage. The PBOC, however, tested the water
payments has surged since the western sanctions, as early as 2014 when several other countries
and a growing number of Russian companies, lagged far behind in the research and planning
including Rosneft, Rusal, and Polyus, have issued phase. Some columnists maintain China’s early
yuan bonds. China is at the fore of a global race to development will allow it to internationalize the
develop CBDCs, and is ramping up domestic pilot RMB and disrupt the US dollar’s hegemony. China
schemes, mainly for retail payments. The PBOC's is streets ahead in terms of digital payments and
participation in m-Bridge represents its ambition the digital yuan doesn’t disrupt existing ways to pay
to eventually promote global, wholesale use of the (with QR codes and face payments already being
e-CNY. A total of 11.8 million RMB (US$1.64 million) widely used in China through Alipay and WeChat
worth of e-CNY was issued in the testing between Pay). However, the biggest innovation is its ability to
Aug 15. and Sept. 23, and the Chinese currency use smart contract technology. The GBA, especially
was used in a total of 72 payment and foreign the Hong Kong Special Administrative Region,
exchange transactions, far greater than the other boasts inherent advantages in the development of
three currencies each. China's top five state banks, blockchain technology. Through smart contracts,
including Bank of China and China Construction users can agree on the use time, use scope and use
Bank, participated in the pilot, settling the CBDCs rules: nontransferable, nonredeemable, time-out
on behalf of their corporate clients. The m-Bridge recovery, targeted use, targeted crowd, targeted
project, launched jointly by the BIS innovation scene, consumer welfare, coupon reduction,
hub and the four participating central banks, aims designed merchant consumption, etc. The e-CNY
eventually to build a common platform for efficient, provides many other advantages: no interest,
low-cost digital payment to promote global trade. low cost, payment and settlement, controllable
But China's yuan internationalization, digital or not, anonymity, security, dual offline payment, etc.
faces challenges amid a slowing economy ravaged Alipay, WeChat, and bank wallets remain the same,
322
