New reports indicate that China could be accelerating the launch of its central bank digital currency (CBDC) to counter potential consequences of the recent US threats and to implement massive post-COVID-19 stimulus.
China’s CBDC To Come Sooner?
According to a recent report the most populated nation in the world is testing its CBDC on a designated mobile application. Another one claimed that some of the organizations behind the project, including the People’s Bank of China (PBoC), AliPay, and Tencent, are already piloting an early version in the Xiongan New Area.
While the previous information maintained that the digital currency would be initially used for retail payments and Communist Party members to pay their membership fees, the local news from today suggests two different main objectives for China’s CBDC.
Firstly, it could arrive sooner to counter potential US threats to local financial institutions and the yuan’s international settlement.
“Although the US hasn’t put Chinese financial firms and institutions onto its Entity List, the US may still pose widespread threats to Chinese institutions and impact the yuan’s standing in international settlement. In this regard, China’s state-run digital currency may be rolled out sooner than expected to counter a possible US block.”- said Cao Yin, a Beijing-based blockchain industry insider.
Also, the nation will reportedly utilize the CBDC to implement large-scale stimulus for the post-COVID-19 economy. Yin explained that the “tracing characteristics of the blockchain-backed digital currency can help money flow into the real economy and toward firms in need.”
The Sanctions Between The US And China
The two largest economies by nominal GDP, the US, and China, are in evident conflict once again. The latest disruptions in their relation accelerated this week after the Asian country proposed new national security laws in Hong Kong aiming to ban sedition, secession, and subversion.
Thousands of citizens went out to protest against it as the majority believes the law could jeopardize the One Country, Two Systems policy that allows Hong Kong to retain its own economic and administrative operations. Local police fired tear gas and water cannon to disperse the rallying people.
According to US National Security Adviser Robert O’Brien, the new legislation could allow China to “basically take over Hong Kong.” Therefore, he believes that the US will continue with its initiative to impose sanctions on both.
“If they do [pass the law], Secretary [of State] Pompeo will likely be unable to certify that Hong Kong maintains a high degree of autonomy, and if that happens, there will be sanctions that will be imposed on Hong Kong and China.”