China’s progress in digital yuan no threat to euro’s international role
Published: Jun 30, 2021 07:17 PM
Residents who received red packets of digital yuan use the money in stores in Shenzhen, Guangdong Province. Photo: Li Hao/GT

Residents who received "red packets" of digital yuan use the money in stores in Shenzhen, Guangdong Province. Photo: Li Hao/GT

China's rapid progress in developing a digital yuan poses a "key risk" in preserving and strengthening the euro's international role, said European Central Bank Governing Council member Francois Villeroy de Galhau, according to Bloomberg.

The Bank of France governor has seemingly mixed too many political factors into his opinion on the digital yuan. By exaggerating the digital currency's influence on euro, Villeroy said "the challenge here is also a geopolitical concern."

The alarmist "threat theory" is a demonization to China's digital yuan, which has seen opposition even within the Europe. Sweden's central bank Riksbank governor Stefan Ingves recently said that digital yuan can never be a global threat, Bloomberg reported.

With the accelerated development of the digital yuan, it has been increasingly described as a threat to other regions in the world by some politicians and experts in the West, but as the governor of the Riksbank pointed out, the "digital yuan threat theory" is simply a false proposition.

Firstly, the rapid development of the digital yuan is only an inevitable result of China's robust digital economy. As a rising digital superpower, China is entering a fully integrated internet era. A massive user population and vast mobile apps have set solid foundation for the application of digital currency. The technology design and operation framework of the digital currency is now almost complete. Major commercial banks have made preparation in technology, system building and operation management for the rollout. As the central bank continues expanding trials sites, the implementation and promotion of the digital yuan across the country will continue to step up.

Second, the application trial of digital yuan currently focused on the domestic market. When it is applied in economic and trade cooperation in the future, it is set to play the same role as yuan. Digital yuan merely the product of this development trend, in the international monetary system it actually has the same position as the yuan, and it will follow the rules under current international currency framework. The yuan does not challenge the euro's status, so the logic of "digital yuan threat theory" is also wrong. The international credibility of digital yuan will be established during the process of its development and improvement.

Third, the rapid development of the digital yuan does not pose any risk to the euro, but to further facilitate 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 will further deepen and consolidate the original economic and trade relations.

As China leads the way in digital currency development across the world, it is not unexpected that political attacks are arriving from political actors in certain countries. These attacks also prove the importance and great potential of China's digital currency from the side.

The demonization against China's digital yuan actually stem from the cliché of "China threat theory." Facing the increasing attacks, China should take effective measures to defend the image of digital yuan, because currency issues are essentially sovereign issues.

The author is director of the Finance Research Center at the Institute of Finance and Economics at the Central University of Finance and Economics.