This week there have been multiple articles in the Chinese press about the potential end of the U.S. dollar’s dominance and China’s central bank digital currency (CBDC). One described threats of sanctions as making SWIFT and the dollar lose credibility. Another envisions the digital yuan (or DCEP) as creating a moat to protect the Chinese economy from the U.S.’ expansionist monetary policy.
Qian Jun, the chief economist of China’s ICBC International bank, a division of the world’s largest company, outlined how the 2008 crisis increased dependence on the liquidity of the U.S. dollar. And the recent additional monetary easing would add to that. But it’s not without risks of unwinding.
He believes if there were a Libra or digital dollar, it would further increase dependence on the dollar. But “if DCEP can seize this historical opportunity and combine it with the ‘Belt and Road’ construction and global value chain reconstruction, it will promote the internationalization of the RMB and the ‘network effect’,” wrote Jun.
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