[Global Issue+] China’s Digital Yuan Stretching Out Ahead of Beijing Olympics

260 million users... Usage expansion during the Olympics
Concerns over US dollar hegemony threat... Heightened vigilance expected going forward

[Image source=EPA Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The opening of the Beijing Winter Olympics, designated by the Chinese government as the first public usage period for the commercialization of the digital yuan, is just around the corner. Major e-commerce companies in China are rushing to announce projects linked to the digital yuan, drawing global attention. Although its usage is still lower compared to existing digital payment methods like WeChat Pay and Alipay, there are even forecasts that, with strong support from the Chinese government, it could challenge the dominance of the US dollar in the future.

According to the South China Morning Post (SCMP) on the 30th, Meituan, China's largest delivery company, announced that it has started accepting digital yuan payments from over 200 businesses, including restaurants, hotels, and supermarkets. This move is reportedly in line with the Chinese government's policy to publicly use the digital yuan ahead of the Beijing Winter Olympics opening on February 4th.

Earlier, Tencent-operated WeChat Pay and Ant Group-operated Alipay also announced the official start of digital yuan payments, and it is reported that the number of users is increasing significantly within China.

260 million users expected by December... Significant increase anticipated during the Olympics

[Image source=Yonhap News]

As of last month, the Chinese government reported that the number of digital yuan users is approximately 260 million. Although this is a smaller number compared to the over 700 million users of WeChat Pay, it is known to be growing at a very rapid pace.

Zhou Ran, Director of the Financial Market Department at the People's Bank of China, who oversees the development and distribution of the digital yuan in China, recently stated in a media briefing, "As of the end of December last year, there were 8,085,100 pilot usage points for the digital yuan, 261 million cumulative personal wallets opened, and transaction amounts totaled 87.565 billion yuan (approximately 16.42 trillion KRW)." He emphasized that the number of users more than doubled in just one month.

However, the digital yuan can still only be used in certain designated pilot zones within China. Major designated cities include Shenzhen, Suzhou, Xi'an, Chengdu, Shanghai, Hainan, Changsha, Xi'an, Qingdao, and Dalian. During the Olympics, it will be available throughout Beijing city and at the Winter Olympic venues. The Chinese government's original plan was to allow overseas Olympic visitors to use the digital yuan publicly, but this plan was thwarted due to the worsening COVID-19 situation, which prevented foreign spectators from attending.

Future challenge to dollar dominance... Overseas expansion alongside the Belt and Road Initiative

[Image source=AP Yonhap News]

The Chinese government is reportedly planning to actively increase overseas usage of the digital yuan following its domestic commercialization. The plan includes using the digital yuan for international trade settlements, overseas remittances, futures trading, and financial product subscriptions, facilitating offshore capital inflows. In particular, the government intends to use the digital yuan in the Belt and Road Initiative (land and maritime Silk Road) projects.

Through this, China aims to use the digital yuan not only for general trade but also for loans and business investments with neighboring countries, breaking away from the current dollar-based payment system. If this becomes possible, it could significantly reduce dependence on the US-led international financial settlement network in the mid to long term and lessen the impact of US economic sanctions.

In the US, concerns about the digital yuan are reportedly high. According to the Wall Street Journal (WSJ), many directors within the Federal Reserve (Fed) oppose the digital yuan and digital currencies in general, citing that they could greatly destabilize the existing financial system. It is expected that conflicts between the US and China over the commercialization of digital currencies will become more apparent in the future.

This content was produced with the assistance of AI translation services.