The completion of the experiments to issue the Chinese central bank digital currency coincides with the launch of the Corona virus vaccine, the easing of travel restrictions in many countries, and the emergence of signs of recovery in the severely affected tourism sector.
In a report published by the American magazine “National Interest”, author Francis Chen says that if the epidemic clouds and global tourism flourishes, this will push the digital yuan to the forefront of the global financial scene.
Can China’s economic miracle continue?
National Interest: China is displacing America to become the largest economy in the world.. Here are the following facts
Can the Chinese yuan dominate the world?
China Bans Cryptocurrency Trading, But Allows Mining.. Why?
In his view, Chinese outbound tourism could be an effective way to internationalize the digital yuan and boost its value enough to challenge the US dollar as the world’s dominant currency.
China has worked since the global financial crisis that erupted in 2008 to support the use of its currency abroad in order to crowd out the US dollar, but it has faced significant obstacles – as the writer says – especially due to the strict controls imposed by the Chinese government on the currency.
The dominance of the dollar in Asian supply chains has continued over the past years, as it accounted for nearly 80% of international transactions for Asian banks in the third quarter of 2019.
Currently, China is betting on the digital currency issued by the central bank and completely supervised, and the digital yuan seems more suitable for global use and more able to compete with the dollar, if the People’s Bank of China (the central bank) allows it to be used externally.
But the globalization of the digital yuan depends on how well other countries welcome a currency controlled by the Chinese central bank, and the restrictions that may be placed on its use.
The digital yuan is more suitable for global use and more able to compete with the dollar (Reuters)
Tourism in the service of the digital yuan
Overseas Chinese tourists are expected to become ambassadors of the new digital currency, and the Chinese government has announced that it intends to officially issue the digital yuan during the Beijing Winter Olympics in 2022, and Chinese tourism abroad appears to be the most powerful way to encourage its global use before the official issuance.
In fact, Chinese tourism constitutes the largest tourism sector among all countries of the world, and the Chinese government is aware of this advantage, and has previously benefited from it as an economic pressure tool against Taiwan.
China may resort to using this weapon against other countries that receive large numbers of Chinese tourists, in order to pressure them to accept dealing in the digital yuan, especially in light of the expected recovery in the tourism sector during the coming period.
Some sellers dealing with Chinese tourists in a number of countries use the Alipay electronic payment platform, and the Alipay and WeChat applications are expected to play an important role in promoting the digital yuan, and the People’s Bank of China can expand The scope of using its currency abroad by relying on these two applications are already widespread.
And if this central bank approves the external use of the digital currency, it is likely that Southeast Asian countries will be the first to deal with it due to its heavy dependence on Chinese tourists.
Given Europe’s growing dependence on Chinese tourism, European countries may in turn accept the digital yuan, which would enhance China’s financial influence on a global level and contribute to undermining the dominance of the dollar.
In 2019, the number of Chinese tourists abroad reached record levels, reaching about 170 million. The most popular tourist destinations were Thailand, Japan and Korea. In the same year, the number of Chinese tourists in Europe increased significantly.
Chinese tourism constitutes the largest tourism sector among all countries in the world, and the government is aware of this advantage (Reuters)
If the digital yuan can challenge the dominance of the US dollar in global transactions in the medium term, this will lead to more tension and escalation in the context of the strategic conflict between the United States and China, where the relative decline of the dollar will undermine the global financial influence of the United States.
According to him, tension may intensify if countries allied to the United States agree to use the new digital currency through Chinese tourists, so the United States may resort to coordinating with allies to take a unified position on the digital yuan and counter the influence that China is trying to exercise through this new currency.
U.S. efforts could include highlighting the potential for China to breach privacy and steal data through digital currency, thus harming the interests of the United States and its allies.
And the United States – according to the author – can lead the process of drafting a set of international standards on digital currencies issued by central banks, and protecting personal privacy, to reduce the risks involved in dealing with the digital yuan.