China is stepping up efforts to internationalize its currency by expanding the use of its digital yuan, including through a cross-border payment pilot with Singapore.
The announcement was made Wednesday by the People’s Bank of China (PBOC) and is part of a broader financial support plan for China’s New International Land-Sea Trade Corridor, News.Az reports, citing Chinese media.
Launched in 2017, the corridor connects landlocked cities in western China with hundreds of global ports via rail, road, and shipping routes.
The PBOC, together with seven other government ministries and agencies, pledged to support “pilot programmes for cross-border digital yuan payments between the [Chinese] mainland and Singapore” and promote “cross-border payments using central bank digital currencies” with regions including Thailand, Hong Kong, the United Arab Emirates, and Saudi Arabia.
Hong Kong remains the largest offshore yuan market, highlighting the growing international reach of China’s digital currency initiative.
First piloted in 2020, the e-CNY is the digital form of China’s sovereign currency, and Beijing has accelerated efforts to encourage its use in cross-border payments and overseas markets. The digital token offers an alternative amid an international frenzy over stablecoins, and it aims to erode the dominance of the US dollar in the global financial architecture.
The latest developments also come as China is looking to diversify exchanges with other countries amid its trade war with the United States.
Under the new plan, Chinese authorities will strengthen bilateral currency cooperation with Southeast Asian and Central Asian countries, promoting yuan settlements in trade and investment.
Beijing will also help foreign trade companies use its currency “more extensively” for settlement, while encouraging the yuan’s use in a wide range of scenarios and activities – from Asean countries’ investments in China, to bulk commodity transactions and cross-border financing, guarantees and asset transfers.
To support the shift, China aims to expand the Cross-Border Interbank Payment System (CIPS), Beijing’s alternative to the US-dominated Society for Worldwide Interbank Financial Telecommunication (Swift) payment system in international trade.
Authorities promised to help “eligible corporate banks” in relevant provinces join the CIPS while exploring the possibility of expanding the use of the digital yuan in payment settlements, financing and tax refunds involving the corridor project.
Domestically, Chinese authorities have promoted the digital yuan’s adoption by issuing e-CNY consumption vouchers and using the token for public procurements, while some state-owned firms use it to pay salaries and benefits. Thus far, usage has been mostly concentrated in retail payments.
