There have been a few new developments concerning the digital renminbi of note. And interestingly they do involve cross-border payments. First, in late December, Chinese media reported that The Bank of China worked with the Shanghai Gold Exchange to enable the settlement of a 100 million RMB (US$14 million) gold trade. The transaction spanned Shanghai and Hong Kong, with Bank of China Hong Kong also involved. Second, the Bank of China also recently participated in a cross-border transaction for iron ore. That one involved Hong Kong and China’s Baowu, the state-owned iron and steel company. And in October, PetroChina used the digital renminbi in a commodities payment for the first time.
What is notable about all of these transactions is that the key players are massive state-owned companies, which can be effectively considered arms of the Chinese government. Beijing can exercise its influence on them to encourage various cross-border e-CNY use cases. The Chinese government’s ability to impact their decision-making is considerably greater than is the case with private enterprises such as Tencent and Alibaba.
With that in mind, we expect to see somewhat faster progress in areas of e-CNY payments where state-owned firms are dominant. It will not be as straightforward to sync the Chinese CBDC with the already self-contained and highly efficient Alipay and Tenpay digital payment ecosystems.
Meanwhile, Singapore is showing interest in the digital yuan. In July, the Chinese subsidiary of Singapore’s DBS Bank launched a merchant collection solution for the e-CNY. At the time, a DBS executive mentioned interest in working towards cross-border CBDC payments. building on that for cross border CBDC payments. Additionally, about a month ago, China and Singapore announced that tourists from the two countries will be able to pay with the e-CNY when travelling to both countries as part of a new pilot program.