(Kitco News) – Central bank digital currencies (CBDCs) have been a hotly-debated topic in recent years as countries like China and India launched pilot programs to introduce digital currencies to their populations. And while many maintain that digital fiat is a foregone conclusion, a recent report suggests that the digital yuan has thus far been a failure.
According to a report from the US-based Chinese-language newspaper Epoch Times, the digital RMB political project championed by the country’s leader, Xi Jinping, was “intended to control people's property use rights internally and challenge the hegemony of the US dollar externally, but it has basically failed.”
After noting that Yao Qian, the main promoter of the project, was recently dismissed, Epoch Times said, “Qian's dismissal means that Xi's power has been weakened.”
“According to a report on the website of the Central Commission for Discipline Inspection and the National Supervisory Commission on Wednesday (20th), Yao Qian, former director of the Science and Technology Supervision Department of the China Securities Regulatory Commission and former director of the Information Center, was accused of using regulatory power to seek benefits for specific technology service providers,” the report said. “He was expelled from the party and public office and transferred to judicial authorities.”
Qian has since been arrested as part of an anti-corruption push, and the Epoch Times suggested that there could be people behind the scenes who orchestrated his arrest as part of an effort to bring the digital yuan pilot to an end.
Qian has been involved with developing the digital yuan since 2014 and is considered the foremost expert on China’s CBDC, so his removal has sparked a wave of speculation about what is really going on in the background.
Despite the many efforts of the People’s Bank of China (PBoC) to push the adoption of the digital yuan, in September 2023, a report was released titled “Digital RMB has been promoted for four years, why are there so few people using it?,” which acknowledge the long-standing doubts many people have about the use of a digital RMB.
Epoch Times noted that a survey conducted by a popular social media influencer on X showed that 90% of netizens had never seen or used the digital yuan, with many saying the project has become one of Xi Jinping's many unfinished undertakings.
The report said that while the digital RMB project was originally pitched as something that would change the lives of Chinese citizens, the latest messaging is that it will serve as a supplement to the existing payment system, prompting the author to ask, “Isn’t this an admission of failure?”
According to Tang Jingyuan, a senior commentator living in the United States, Yao Qian’s fall from power for corruption “basically means that the digital RMB project has failed.”
“This failure also means that the top leaders of the Chinese Communist Party want to temporarily abandon this approach in order to ease social crises and social contradictions,” the report suggested. “It is also to encourage private enterprises to have better development to boost the economy, and they do not want to rush into it so as not to provoke civil unrest.”
Jingyuan said the real goal behind the digital yuan project is to replace Alipay and WeChat Pay, the two major privately-owned payment processors, to “achieve a unified, nationalized electronic payment service.”
A secondary goal is for the digital RMB to “deprive ordinary people of their right to use and control their private property,” he said. “In other words, in the future, how ordinary people spend their wages and property will be strictly regulated. The government regulatory department only needs to tap the keyboard to allow you to use it or not allow you to use it under various pretexts. In fact, it is equivalent to depriving people of their most basic right to control and use their own private property.”
Jingyuan suggested that the digital yuan is a play by Xi Jinping to “further strengthen the already strong surveillance over Chinese society.”
Wang Guochen, assistant researcher at the Chinese Economic Research Institute, told the Epoch Times that according to Chinese data reports, the future control of the digital RMB will be “like a Word folder, with different amounts in each folder.”
“For example, if you open a pork folder with a 50-yuan amount, you can only use 50 yuan a day,” the report explained. “Once you use it up, there will be no more, so it is like a food coupon ration. If you line up early or late, you can only spend 50 yuan to buy pork in a day.”
“Second, it will be combined with the so-called social credit system,” the report added. “People with low credit scores may only receive 100 yuan a day to live on, while people with high credit scores may receive 10,000 yuan daily. People with low social credit scores may be unable to take the high-speed rail. So if you are a disobedient dissident, you may only receive 10 yuan a day, or even no money at all, and you will not be able to live.”
Another primary motivation behind pushing the digital yuan is to “internationalize the renminbi and break free from the US control over the financial system,” the report said. “The Beijing government has been trying to conduct more foreign trade business with the renminbi over the past decade.”
But getting follow-through on this front has been a challenge for Beijing as “most wealthy countries are allies of the U.S. and it is difficult for them to switch to the RMB.” Three-quarters of global trade occurs in markets outside of China, and the countries involved see numerous risks involved with holding RMB and don’t want to put their trade relationship with the U.S. at risk, the report suggested.
Wang Guochen told the Epoch Times that “the CCP does want to challenge the hegemony of the US dollar through the digital RMB. However, the technology is still not enough.”
If they implement the technology in its current state and level of adoption, “Taiwan can actually send 10 trillion RMB from China to its digital RMB every day, and their currency will be in chaos,” the report said. “To put it bluntly, it is very easy to be attacked by hackers.”
Professor Fan Jiazhong of the Department of Political Science at National Taiwan University told the Epoch Times that while Beijing has the strategic goal of digitizing the RMB to replace the US dollar as the main payment platform, the plan faces two major obstacles.
“The first is that the RMB has a bad reputation internationally, and users are easily suspicious,” he said. “This is because the CCP’s political influence is too great, and there are many human manipulations, which make the RMB insufficiently marketable.”
“The second problem is the risk of capital outflow,” he added. “If cross-border RMB transactions become very convenient, capital outflow will become very convenient. Unlike in China, it is not necessarily 100% regulated. This is also what the CCP is most worried about.”
Jiazhong said that Xi Jinping's ultimate goal in promoting the digital RMB is to target the United States and the U.S. dollar, and even if it cannot replace the USD, it can at least reduce dependence on U.S. payment platforms and prepare the country for any potential fallout that could follow if China moves to reincorporate Taiwan.
