The Chinese government is not seeking to replace existing fiat currencies with its own digital currency, according to the former governor of the People’s Bank of China, or PBoC.
The South China Morning Post reported on December 14 that Zhou Xiaochuan, president of the China Finance Association and former governor of the People’s Bank of China, claimed that the Chinese digital yuan is not intended to replace global fiat currencies such as the US dollar and the euro.
Zhou, also known as digital currency electronic payment, or DCEP, said that the Chinese digital yuan is perfectly designed to transform trade and investment across borders. Chu compared the Chinese digital currency to the Facebook-backed cryptocurrency project, formerly known as Libra:
“If you are willing to use it, the yuan can be used for trade and investment […] But we are not like a scale and we have no ambitions to replace existing currencies.”
Chu further said that China has learned a lesson from the global rejection of the scale project, as regulators fear it will disrupt financial systems and monetary sovereignty. Zhou said China has taken a more cautious approach:
“Some countries are concerned about the internationalization of the yuan.
Zhou pointed out that one of the biggest benefits of DCEP is that it enables real-time payments and currency transfers. He said: “If currency exchange takes place at the moment of the retail transaction, and this exchange is supervised […], it provides new opportunities for interconnection.”
Zhou also confirmed that most cross-border retail payments involving Chinese consumers are actually cashless and settled via credit cards or payment services such as Alipay and WeChat Pay, but the digital yuan has additional benefits such as real-time processing and transparency.
As China actively developed its experimental cryptocurrency programs, some financial experts in other countries have expressed concern about being delayed in developing the central bank’s digital currencies. In October 2020, Japan’s Deputy Minister of Finance for International Affairs warned the international community about the potential dangers of the Chinese digital yuan, pointing to the potential threat that China would gain a first-time advantage.