Digital Renminbi Could Make Commercial Banks Redundant, Will Be a Rival to Third Party Payments Platforms: Ex-Bank of China Chief

The former head of one of China’s big four-state owned banks says that the Chinese central bank digital currency (CBDC) could make traditional banks obsolete for certain key purposes, as well as be a rival to the digital payments giants which emerged in the country last decade.

Li Lihui (李礼辉), formerly the head of Bank of China (BOC) and currently the chief of the blockchain work unit of the National Internet Finance Association (NIFA), wrote in a recent opinion piece that the CBDC will “change the payments market, competition in the banking sector, money market regulation and the global monetary system.”

With regard to banking competition, Li believes that CBDC technology could lead to “separation from networks, separation from banks, and separation from accounts in the execution of value transfers.”

“This will lead to loosened ties with bank accounts…we may even no longer need commercial bank accounts, and no longer need commercial bank intermediaries.

“In the past financial institutions relied upon large-scale operation to be able to obtain cost management and customer acquisition advantages….in future this will to a very large extent be determined by digital technological innovation and application capability.”

Li said that digital renminbi will have a profound impact upon the Chinese payments market in two specific areas:

1. The launch of the digital renminbi will add an official payments tool to a market dominated by non-state platforms such as Alipay and WeChat. Li forecasts that in the next five to 10 years the digital renminbi will “walk alongside” other payments tools such as WePay, Alipay and conventional bankcards. 
2. The Chinese CBDC adds the “digital renminbi” to the accepted forms of statutory currency, and in certain scenarios the digital renminbi will replace cash forms of the renminbi. Li said however, that he does not expect the physical cash to completely disappear from the Chinese economy. 

In November 2020 Li said at the 2021 Caijing Annual Forum that whether or not the digital renminbi would replace WeChat Pay and Alipay as China’s “primary payments tool” would be determined by the “process of decision-making by the market.”

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