With the international community making an effort to recover from the COVID-19 pandemic, Chinese President Xi has appealed for heads of government to keep an open and accommodating attitudes towards Central Bank Digital Currencies, or CBDCs.
The comments follow China is attempting to position the yuan as a global reserve currency which is alternative to the US dollar. All these efforts intend to translate China's significant economic heft into international influence at a level comparable to the U.S.
Xi Favors CBDCs
Xi noted that inclusion and economic growth were down to enhanced international cooperation and expansion of the digital economy. He stated that this would help revive the world's economy. As such, G20 leaders should maintain a friendly attitude towards CBDCs.
In his words: "The G20 also needs to discuss developing the standards and principles for central bank digital currencies with an open and accommodating attitude, and properly handle all types of risks and challenges while pushing collectively for the development of the international monetary system."
Nov. 2 saw more than $300 million worth of the recently-launched Digital Yuan had been spent. Although other nations such as Bahamas and Cambodia launched their CBDCs prior to China, the total potential scale of Digital Yuan is to reach 1 billion users, as per an estimation by Goldman Sachs. $2.7 trillion annual total payment value (TPV) and $228 billion in issuances would be able to be reached within 10 years. This allows China to be a leading player in CBDC implementation.
The internationalization of the Digital Yuan
Analysts have stated that Xi's wording on positioning the Digital Yuan as the top player in the global CBDC rollout is down to not merely contend in technology.
SWIFT noted that although China keeps control of an estimated 16.4 percent of global GDP, the RMB accounts for merely 1.9 percent of global payments while the U.S. dollar sits at 79.5 percent. It is anticipated that the development of the Chinese CBDC will expand the RMB's share of payments despite little progress.
The Digital Yuan would enable China to boast the chance of a global payment system independent of the SWIFT network, allow Beijing to be likely to strengthen economic ties with nations now under U.S.-led economic sanctions like Russia and North Korea. All these would help bring them closer into its economic orbit and therefore reform the global political order.