China’s progress in the digital yuan does not threaten the international role of the euro
Residents who have received “red packets” of digital yuan use the money in stores in Shenzhen, Guangdong Province. Photo: Li Hao / GT
China’s rapid progress in the development of a digital yuan represents a “key risk” for preserving and strengthening the international role of the euro, said François Villeroy de Galhau, member of the Board of Governors of the Central Bank European, according to Bloomberg.
The governor of the Banque de France has apparently mixed up too many political factors in his opinion on the digital yuan. Exaggerating the influence of the digital currency on the euro, Villeroy said that “the challenge here is also a geopolitical concern”.
The alarmist “threat theory” is a demonization of the Chinese digital yuan, which has met with opposition even within Europe. Swedish central bank Riksbank Governor Stefan Ingves recently said the digital yuan could never be a global threat, Bloomberg reported.
With the accelerated development of the digital yuan, it is increasingly described as a threat to other parts of the world by some Western politicians and experts, but as the Governor of the Riksbank pointed out, the “threat theory of the digital yuan “is simply a false proposition.
First, the rapid development of the digital yuan is only an inevitable outcome of China’s robust digital economy. As a rising digital superpower, China is entering a fully integrated internet age. A massive population of users and vast mobile applications have laid a solid foundation for the application of digital currency. The framework for designing and operating digital currency technology is now almost complete. Large commercial banks have prepared the technology, building systems, and managing operations for deployment. As the central bank continues to expand testing sites, the implementation and promotion of the digital yuan across the country will continue to intensify.
Second, the digital yuan application trial is currently focusing on the domestic market. When it will be applied in economic and trade cooperation in the future, it should play the same role as the yuan. The digital yuan is only the product of this development trend, in the international monetary system, it actually occupies the same position as the yuan, and it will follow the rules of the current international monetary framework. The yuan does not question the status of the euro, so the logic of the “digital yuan threat theory” is also wrong. The international credibility of the digital yuan will be established in the process of its development and improvement.
Third, the rapid development of the digital yuan poses no risk to the euro, but further facilitates the current economic and trade cooperation between China and the EU. The future application of the digital yuan in international economic and trade cooperation will be based on China’s current economic cooperation with other economies. As the digital yuan accelerates its development, it will join the original economic and trade cooperation and deepen and consolidate the original economic and trade relations.
As China paves the way for the development of digital currency across the world, it’s no surprise that political attacks are coming from political actors in some countries. These attacks also prove the importance and great potential of China’s digital currency aside.
The demonization of the Chinese digital yuan actually stems from the “Chinese threat theory” cliché. In the face of growing attacks, China should take effective measures to defend the image of the digital yuan, as currency issuance is essentially a sovereign issue.
The author is director of the Finance Research Center of the Institute of Finance and Economics of the Central University of Finance and Economics. [email protected]