China is expanding the use cases for its central bank digital currency (CBDC), digital yuan or e-CNY, for its Belt and Road initiative and international transactions.
The digital yuan, the digital RMB, was among the first CBDCs to be created and extensively tested. Despite the lack of an official launch, the government has expanded its testing parameters to include multiple cities and millions of individuals.
A plan to promote the use of Chinese digital currency in cross-border trade was issued in Xuzhou, the departure point for many Chinese freight trains bound for Europe. The South China Morning Post reported 18 regular cross-border rail connections from the metropolis to 21 Asian and European countries.
Xuzhou is a commercial hub and intends to promote the use of e-CNY to pay for cross-border train services and storage fees. The experiment plans to expand e-CNY utilization to include tax and utility payments in the city.
Jiangsu province has been incredibly proactive in promoting digital yuan applications. Another city in the region, Changshu, has announced that it will pay civil servants and employees of public institutions in digital yuan.
In addition to Xuzhou, the Hong Kong Monetary Authority announced that the Guangdong-Hong Kong-Macau Greater Bay Area would be a testing site for digital yuan-based cross-border payments.
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.
Chan added that the HKMA, China, and other nations were examining a second cross-border initiative involving Thailand and the United Arab Emirates to “improve efficiency and reduce the cost of cross-border transactions.”
At a time when international trade markets are migrating away from the standard U.S. dollar, the Chinese government has intensified its CBDC initiatives. China has recently concluded multiple trade agreements with countries like Russia and India based on their national currency rather than the U.S. dollar.