May 24, 2023
By Anjali Kochhar
The Chinese autonomous region of Guangxi, situated in southern China, is set to embark on an ambitious plan to widely adopt the digital yuan, with a specific focus on utilising it as a trade currency with member nations of the Association of Southeast Asian Nations (ASEAN). This initiative is part of China’s efforts to bolster the international usage of its digital currency.
The People’s Bank of China’s local branch in Guangxi has revealed that the region will implement various functions of the digital yuan at a national level, introducing unique local features and pioneering the use of the digital currency. One of the key aspects of this plan is to facilitate trade settlements with other Asian countries, as well as utilise the digital yuan during the upcoming China-ASEAN Expo event scheduled for September.
While the digital yuan has undergone testing in multiple cities and has even been utilized for wage payments, this step marks one of China’s initial attempts to internationalise its digital currency as a trade settlement tool. By integrating the digital yuan into cross-border transactions with ASEAN nations, China aims to reduce its reliance on the U.S. dollar and mitigate the impact of dollar-based sanctions through an alternative digital payment system.
Experts have highlighted the significance of the digital yuan in popularising the yuan in foreign markets, emphasising the need for a digital international currency system. This move to internationalise the digital yuan is seen as a strategic measure to challenge the dominance of the U.S. dollar in trade settlements.
Guanxi has been identified by the Chinese government as a crucial region for fostering cooperation and trade agreements with ASEAN countries, which have served as a major destination for Chinese exports. Customs data reveals that during the first four months of this year alone, Chinese exports to ASEAN countries amounted to a staggering $185.2 billion. Recognising the potential benefits of reducing reliance on the U.S. dollar, ASEAN nations are also taking steps to encourage the use of national currencies for trade settlements, safeguarding themselves against geopolitical repercussions.
The adoption of the digital yuan in Guangxi represents a significant milestone in China’s pursuit of integrating its digital currency into international trade. With an eye on ASEAN countries and their substantial trade ties with China, this pilot program seeks to establish the digital yuan as a prominent medium for conducting trade settlements in the region. As the digital yuan gains further traction, its impact on global financial dynamics and the balance of power in trade settlements may become increasingly evident.
As China continues to explore the potential of its digital currency, the outcome of this pilot program in Guangxi could serve as a valuable blueprint for future adoption and internationalisation of the digital yuan, reshaping the landscape of global trade and currency dynamics.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.