Zhou Xiaochuan of China Emphasizes Flexible Strategy for Digital Yuan: "Internationalization Should Not Be Forced"

Shanghai Financial Forum Keynote Speech
"Zhong Digital Yuan Not Intended to Replace Existing Currency"

[Asia Economy Reporter Naju-seok] Zhou Xiaochuan, former governor of the People's Bank of China, mentioned the existence of countries wary of the internationalization of the yuan and proposed a flexible yuan internationalization strategy.

According to the South China Morning Post (SCMP) in Hong Kong on the 14th, Zhou, in his keynote speech at the Shanghai Financial Forum, said, "Some countries are concerned about the internationalization of the yuan," adding, "We must avoid actions perceived as big-power chauvinism by not touching on sensitive issues first and not forcing the internationalization of the yuan."

Zhou Xiaochuan, Governor of the People's Bank of China

Former Governor Zhou referred to differences in economic development levels and debt among South Korea, Japan, and the 10 ASEAN countries, arguing that during the yuan internationalization process, care must be taken not to undermine other countries' monetary sovereignty or disrupt their monetary and foreign exchange policies.

He also asserted that China's introduction of digital currency is solely for the convenience of domestic and international users and is not intended to challenge the existing global monetary order centered on the US dollar and the euro. This statement appears to be a response to analyses suggesting that the People's Bank of China's accelerated issuance of legal digital currency (CBDC) signals the yuan beginning to challenge the US dollar's hegemony.

Zhou said, "If you want to use CBDC, it can be used for trade and investment," but added, "There is no ambition for CBDC to replace existing currencies."

These remarks by Zhou, who has previously emphasized the digitalization of the yuan, seem less like a call to slow the pace of yuan internationalization and more like an attempt to reduce other countries' wariness toward the yuan's internationalization.

It is anticipated that through the CBDC, China will expand its influence not only domestically but also among countries incorporated into its economic sphere via the Belt and Road Initiative. Additionally, Chinese travelers are expected to use CBDC overseas, aiming to establish a digitalized Chinese yuan payment system.

China is conducting large-scale public trials across the country with the goal of introducing the digital yuan before the Beijing Winter Olympics scheduled for February 2022 at the latest.