Promotion of digital yuan will serve Hong Kong well for the future
- As a leading international financial hub, the city has an important e-CNY role to play when it comes to global trade and business
Slowly but surely, the centralised digital yuan is becoming part of the daily lives of millions of people in mainland China. In the latest development, two cities in the eastern province of Jiangsu are joining the central government’s aggressive push for e-CNY not only for domestic use, but also for cross-border trade.
As a major international financial hub and an offshore yuan centre, Hong Kong has an even more important role to play in promoting e-CNY in global trade and finance. A sovereign digital yuan will be integral to internationalisation of the currency.
In Changshu, a city of 1.5 million, salaries of tens of thousands of public sector employees will be paid entirely in e-CNY. Meanwhile, Xuzhou, another city in Jiangsu, will use e-CNY for transactions involving services and storage charges for goods carried by cross-border trains.
A logistics hub that is the starting point of many Europe-bound freight trains, it aims to promote e-CNY for trade under the Belt and Road Initiative. Domestically, it will also extend usage to paying taxes and utilities for residents.
Bank of China offers customers e-laisee to promote e-CNY in Hong Kong
The two cities follow e-yuan pilot schemes held since 2020 in Shenzhen, Suzhou, Xiongan and Chengdu. In late 2021, Hong Kong became the first offshore centre to test e-CNY usage, followed by a second round of tests.
Experts agree the digital currency will not only enhance transparency and deter corruption and criminality, but also challenge the hegemony of the US dollar. However, its limitation, for now, is that many people still prefer to use popular digital payment platforms.
It is, therefore, a matter of encouraging sufficient people to use e-CNY to reach a critical threshold. More countries such as Brazil, South Africa, Argentina, Russia, and some Asean states are starting to use the yuan for trade and other financial transactions.
Given the centrality of the Hong Kong economy, the city has its work cut out. It needs to be more proactive in exploring new opportunities offered by digital currencies, especially in promoting the joint use of e-HKD and e-CNY in the Greater Bay Area. Cross-border payments and banking services will be obvious targets.
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While China may be ahead of most in the digitalisation of its national currency, 86 per cent of central banks worldwide are actively researching the potential of issuing their own digital currencies, according to the Bank for International Settlements. Hong Kong can ride on the coattails of mainland China to get ahead.
Digitalisation and popularisation of the yuan have gained momentum, especially since the outbreak of the Ukraine war. It has become apparent that the US dollar is being weaponised by Washington, and financial sanctions exploiting the international financial architecture have become routine tools of US economic warfare.
As an alternative, e-CNY is the currency of the future.
