What will 2024 bring for the digital renminbi?

Written by Kapronasia || January 10 2024

2023 was a year of incremental progress for the digital yuan and we expect more of the same in 2024. Gradually, hype about China’s central bank digital currency (CBDC) is easing, though it still flares up from time to time. Case in point: that report published by Bloomberg last summer that depicted the mBridge cross-border CBDC initiative as a potential challenger to the US dollar in the global financial system. As much as such narratives may generate clicks, they fail to ring true.

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.