China drive for digital currency dominance

I do not look like an expert in economy nor I will have this pretention in showing up for somebody I am not. I took the liberty to search on the world currency and report to the one reading our AMHE newsletter, the realities of an economic world in turmoil. We may be the little pion between the superpowers dictating our way of living. Nowadays, China and United States of America are fighting between them, crushing everybody else on their way and getting ready to impose a new order in the world.

We can only guess that something is cooking in China. The year of the “Rat” started in February 2020 and China became paralyzed with the COVID-19 virus and imposed to the world a pandemic which continue to kill millions around the world. The town of Wuhan was found to be the point of origin of this virus. A mysterious virus, the COVID-19, has imposed its will on the people. A new year, the year of the “Ox” (Oxen) has allowed China, the most populous country in the world to rebound and re-gain its confidence. What many do not understand, is that this new year brings the 50th anniversary of the communist party and the need for a government to demonstrate to the world their power of persuasion. China is getting ready to become the leader in the world economy.

China may have taken already an important lead in the lunching of an electronic currency which will change the way business is conducted in a near future. If they succeed in their plans for the invention of an e-yuan, most of the Chinese neighbors, the United States and Europe will pay the consequences. China is now the front runner in developing such digital currency through its central bank (CBDC).

A trial at the new currency was attempted in September 2020 as a new version of the Chinese Yuan” renminbi” (CNY), a general term for the currency of the people s of China. For the last five years, the Chinese’s have been working on the project in which banks are required to convert a part of their yuan into digital form and distribute them to business and citizen through a mobile technology. They invented the digital version of the Yuan (DC/EP) after a previous cryptocurrency has shown the path to a new way of dealing in the business world.

China would like to bring this mean of doing business, to its large population too often standing at the marge of the mainstream economy. By this means, they hope to accelerate the participation of a cashless society. One can understand the importance of such way in dealing with especially, African country, I want to guess… It is a vision which allowed China to take an advance on all its competitors. I understood truly the reason for their involvement in Africa and the Caribbean’s allowing poor countries to accomplish projects out of their reach, landing money etc. It is the Chinese vision of a world which may allow them to have a hegemony.

Many of us may not understand the difference between the Cryptocurrency (BITCOIN) and the DC/EP, the new digital version of the Yuan. The BITCOIN is a digital or virtual currency created in 2009 that uses peer-to-peer technology facilitating instant payments. Only the new Yuan has a legal status and can be used as a payment mechanism while the Cryptocurrency is still unclear and unacceptable. These new currencies shoot at a decentralization of the economy to ultimately provide a full control to the Chinese’s government, especially with the new Yuan. More, the digital yuan is anonymous and if the Cryptocurrency was depending on the coin, the Yan is not. The government will be able to track the currency Yuan through the economy and monitor its usage.

Indeed, the Chinese government will be able also to track and manage the flow of money though their economy allowing the officials in the government to plan. So far “Cash” remains the dominant mode of transaction in China. There are also other types of payment with the popular card system which consist in payments through digital transfers of money using mobile devices, token systems etc. More, there are some payment firms as like Alibaba Group (BABA) AliPay and Tencent Holdings Limited’s (TCEHY). “WeChat” represent well this change and a digital Yuan will fit nicely with this transformation. The Chinese government in using the digital token will find it easier to track down any transaction except cash. One has to understand that China does have the largest population not using a banking system and as such this new system will allow most of the population to participate in the mainstream economy.

Finally, this digital Yuan will certainly help propel the Yuan (CNY) renminbi compete in an international reserve. This was the reason why, after the last world financial crisis, ten years ago, the international bankers and economists discussed the possibility of a replacement to the US dollars in international trades. China’s currency is seen more and more as a natural contender to take over the dollar’s place. Where it becomes difficult to find a way to realize these changes, it is the fact because so far the American dollar still accounts for almost 90% of all international settlement transaction while the Yuan renminbi represents only 5%. It is believed that the digitalization of the currency may encourage fast-tracking international settlements, rendering this new Chinese currency even more popular among international traders.

History is rich in examples because, it is the Chinese for centuries who have imposed their will in the world of business. In the 13th Century, a Mongolian emperor who founded the Yuan Dynasty organized a monetary convention to impose his will in stating: “Accept my money or Die”. Later the grandson of the fearsome Genghis Khan found a way to finance his conquests and his search for precious metals from his resources while he announced that he would be able to make money grow out of trees especially the mulberry trees. Marco Polo praised the way the great Khan was able to invent money and his descendants came out with a Fiat currency. Once again, China is taking the lead but this time it brings a digital currency.

In Mandarin Chinese, “Yuan” means round object or round coin. The Qing dynasty had a round coin made in silver. In the republic of China, the Chinese Yan refers to the “renminbi” (RMB). The term is also used to refer to currency units of Japan “Yen” and Korea “Won” and you may not believe it, but it is used as well to translate the currency dollar “Meiyuan” and the euro “Ouyang”. A Chinese Yuan also called “Kuai” can be divided in 10 “Jiao” and a Jiao can be also divided in 10 “fen”.

One will say that business did not go well for the Mongols but the actual Chinese leaders have a currency which appears more durable to offer. China is further along than any other country in the world, trying to impose once more to the world an electronic digital Yuan through a new technology in the goal of mastering the economy and imposing their will on the world of business. President Xi Jinping became the first world leader to support this new technology in October 2020. So digital currency and electronic payment or DC/DP is a big step in bringing new orders in the world.

Soon, the Chinese’s will host the winter Olympic Games if the pandemic allows it. The summer Olympic games scheduled to be held in Japan were already postponed but now re-scheduled to be held during this summer in an area where China has a lot of influence. Many countries have already enounced the ideas of boycotting the games to avoid rewarding China after the effects of a pandemic which originated in their land and which has imposed its will to the world. It will help if the Chinese authorities were accepting responsibilities as of the origins of the pandemic. In anyway, many believe that these next games represent a springboard to boost the new currency by demonstrating how lower operational and transaction costs with greater financial inclusion, can be achieved. They even extend this new way of doing business in fighting crimes.

If all go as planned, this innovation in the financial world will also strengthen the Communist Government in their goal to acquire a full control on China’s monetary system while restoring the power of their giant’s technical firms like Tencent’s Holdings Limited’s (TCEHY) WeChat and AliPay run by Alibaba’s Group Holding IPO bound (BABA), already mentioned above. Many believe that this new electronic Yuan can signal the beginning of the decline of the US dollar in the international commerce. Can the United States afford to lose this challenge? For the moment, China is sprinting ahead in a race that few other countries realized they are also participants. China has certainly become the front runner. in developing a central bank digital currency (CBDC). Over the past years, the use of mobile payments platforms has exploded while cash transactions have declined.

There is a global interest in developing a central bank digital have ordinary citizens involve in the business and the People’s Bank of China is leading t=in these efforts to release digital currency of its own. A survey performed by the bank of International Settlements among 66 central banks, has reported that at least 80% of the institutions are investigating the feasibility of using such a digital currency but less than 10% were near to impose their own electronic coin. Surprise!!! The Federal Reserve bank of the United States was not among the participants.

Maxime Coles MD (2-20-21)


1- “History of the Chinese Yuan”, Currency information and Research. 2011-92-92.

2-  Phillips, Matt (2010) “Yuan or renminbi: what’s the right word for China currency”. The Wall Street Journal

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