China’s Belt and Road Initiative is one of the most ambitious infrastructure plans in the world. This initiative aims to improve regional cooperation through improved connectivity. Meanwhile, the initiative is entirely physical in nature and focuses on enhancing road connectivity.
However, the country’s digital infrastructure plans for cross-border trade have the potential to revolutionize the face of international payments in the commercial realm. This is due to the fact that the project brings together stakeholders from over 150 nations.
China’s Digital Yuan Paves the Way for Belt and Road Initiative
As per recent reports, China is broadening the use of its central bank digital currency (CBDC), known as digital yuan, for the Belt and Road Initiative and cross-border trade.
The Chinese digital yuan was one of the first CBDCs to be developed and extensively tested. Meanwhile, there has been no official launch. But the government has widened its testing parameters to cover multiple cities and millions of people.
The city of Xuzhou serves as the departure point for numerous cargo trains from China bound for Europe. As a result, it has released a strategy supporting the use of the Chinese digital currency in cross-border trade. According to the South China Morning Post, the city has 18 frequent cross-border rail links to 21 Asian and European countries.
China Revolutionizes its Economy with Expanded Uses of CBDC
Xuzhou is a commerce hub with intentions to increase the usage of digital yuan. This will help to pay for services and storage fees for products transported by cross-border trains. In the future, the project intends to expand digital yuan usage to pay taxes and utility services in the city.
In particular, Jiangsu province has taken an aggressive approach in promoting digital yuan use cases. Changshu, another city in the province, stated that it will pay civil officials and employees of government agencies with digital yuan.
Apart from Xuzhou, the Hong Kong Monetary Authority declared that the Guangdong-Hong Kong-Macao Greater Bay Area would serve as a testing ground for cross-border payments utilizing digital yuan. Darryl Chan, the HKMA’s deputy chief executive, said:
“The HKMA is collaborating with the People’s Bank of China, the mainland’s central bank, to test digital yuan as a cross-border payment mechanism in Hong Kong.”
Chan added that another cross-border project involving Thailand and the UAE is being investigated by the HKMA, China, and two other countries. In order to increase efficiency and lower the cost of cross-border transactions.
The Chinese government has increased its CBDC efforts at a time when international trade markets are shifting away from the traditional US dollar. China recently finalized a number of trade accords with several countries that use their national currency rather than the US dollar.
China’s digital yuan is gaining momentum as the country broadens its use for cross-border trade and Belt and Road Initiative. With its extensive testing and development, the digital yuan has the potential to revolutionize international payments in the commercial realm.
In addition, China is aggressively promoting its Digital Yuan use cases in various cities and provinces, including Xuzhou and Jiangsu. These efforts align with China’s goal of increasing its global dominance and reducing reliance on the US dollar in international trade.
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