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China is increasing the use of its digital yuan for cross-border trade.

China is broadening the use cases for its central bank digital currency (CBDC), the digital yuan, also known as e-CNY, to promote cross-border trade in its Belt and Road initiative. The Chinese government has been proactive in testing and expanding the digital yuan’s usage. The digital yuan is one of the first CBDCs to be developed and widely tested, with the government having expanded its testing to include multiple cities and millions of people.
According to a plan promoting the use of the Chinese digital currency in cross-border trade that was issued in Xuzhou, a trade hub in Jiangsu province, the city aims to promote the use of e-CNY to pay for services and storage charges for goods transported by cross-border trains. Xuzhou offers 18 regular cross-border rail connections to 21 nations in Asia and Europe, making it an ideal location to pilot the use of e-CNY in cross-border payments.
Hong Kong Monetary Authority (HKMA) is also testing the digital yuan as a cross-border payment tool in the Guangdong-Hong Kong-Macau Greater Bay Area. “The HKMA is working with mainland’s central bank, the People’s Bank of China, to test the digital yuan as a cross-border payment tool in Hong Kong,” said HKMA deputy chief executive Darryl Chan. The Chinese government hopes to improve efficiency and reduce the cost of cross-border transactions with these pilot projects.
In addition to cross-border trade, the digital yuan may also have implications for domestic payments in China. The Chinese government plans to use the digital yuan to reduce its dependence on the traditional banking system and to increase financial inclusion for those who are currently unbanked. The success of the digital yuan could also help China to expand its economic influence in the Asia-Pacific region and beyond, as other countries adopt its use in cross-border trade and potentially even domestic payments.
The Chinese government’s efforts to test and expand the digital yuan’s usage suggest that it is moving closer to a launch, although it has not yet been officially launched. China’s efforts in this area may give it a competitive advantage in the international trade markets, particularly as countries seek to diversify away from the U.S. dollar.
The digital yuan is part of a broader trend towards the digitalization of currencies, with other countries also exploring the use of CBDCs.

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