People’s Republic of China’s Digital Yuan (e-CNY)

The People’s Bank of China (PBC) has been developing a central bank digital currency (CBDC), specifically the digital yuan or the e-CNY. The digital yuan has a link to the legacy yuan in value terms but could act for retail digital transactions in a centralized payment system. The Chinese digital yuan has been designed to increase greater domestic state control and to gain a strategic global position of influence. Beijing carries a strong belief that a digital currency will play a critical role in the future of geopolitical competition, and its creation of the e-CNY is a crucial step to getting ahead in that field. Through this paper, I will delve into the likely-made contributions of the digital yuan to financial inclusion and financial stability in the PRC. Furthermore, focusing on the potential impact of it on global trade, including oil trade. This paper includes the following: • A brief analysis of the contribution of the PBC’s digital yuan to financial stability, taking into account the possible after-effects of the introduction of the digital yuan on the assets and liabilities of commercial banks and on private borrowing behavior, as well as the possible impacts on non-bank firms. • An analysis of the contribution of the PBC’s digital yuan to financial inclusion, taking into consideration the expected value contributions of the digital yuan to retail users beyond what they obtain from the current system. • A potential briefing of its impact on global trade, focusing on the globalization of financial technology, effect on other established currencies and cross-border trade. Extending the potential impact of PBC’s digital yuan at a global level in reference to oil trade in particular alongside “de-dollarisation”.