A leading Chinese economist says that China’s central bank digital currency (CBDC) – commonly referred to as the digital renminbi, will not serve as a vehicle for internationalisation of the renminbi on its own.
Guan Tao (管涛), global chief economist with Bank of China International, points out that achieving currency internationalisation requires the support of a range of factors in addition to technical feasibility.
“Aside from cross-border payments functionality, the internationalisation of a currency also requires that it play a role in the areas of unit of account, financing, investment and reserves on an international scope,” wrote Guan in an article published on Sina Weibo entitled “Looking at the Relationship between Digital Currency and Currency Internationalisation from the Perspective of Monetary Function” (从货币的功能看数字货币与货币国际化的关系).
“In these areas, CBDCs and stable coins do not possess any advantages compared to bank money. From the perspective of China, even though its research and development of the digital renminbi is at a leading position globally and it possesses the technical conditions for cross-border usage, the most critical factor for renminbi internationalisation remains system supply.”
Guan says that focusing excessively on the role of the digital renminbi in the internationalisation of China’s official currency could cause international dispute.
“The development of the digital renminbi isn’t an easy path for driving renminbi internationalisation, and is unlikely to become a ‘weapon’ for dealing with currency hegemony,” he writes.
“An excessively political interpretation of CBDC experimentation can lead to deviations in direction, and is even more likely to cause international trouble.”