As the United States and China continue to develop a more hostile relationship since both countries are trying to out-compete against one another on the global stage. The United States is the current superpower, and China is the upcoming (emergent) superpower. Both countries can spend a lot of money to improve their military strength in terms of troops, hardware, and technology. Both countries are worrying that the opponent would do so well in terms of global trade, influence, and everything else that it would outstrip the home country’s advantage on the global scale! Imagine that one day China could be so influential that it would prevent most countries around the world speak up and side with the United States to prevent China from invading Taiwan out of fear that China would stop trading and even worse will start a military campaign against the outspoken country in a near future. In reverse, China wouldn’t want the United States to continue to dominate the globe since China is now stronger and would become a huge boulder that could block the United States’ global domination.
We all know that the United States Dollar is the dominant reserve currency in which even China itself is holding a large number of dollars just to allow home companies and home local governments to transact with countries that are only wanting to trade in dollars on a global scale. As the United States is getting more hostile toward China for obvious reasons such as wanting to prevent China from dominating the world with its technical standards and influence and whatever else, China knows that it could not rely on the United States’ goodwill in the long run. As the United States sanctions Iran and North Korea and few other countries from conducting dollars on the global scale, China knows that it could be sanctioned by the United States if both countries are going to get even more hostile toward each other shortly. This is why China has been creating a different global transactional path known as CIPS which allows China to conduct trades on a global stage without relying on the SWIFT system in which the Dollar is dominated.
Instead of just being satisfied with what CIPS has to offer for China in terms of conducting trades with countries that are friendly to China on the global stage such as Iran, China is taking one step further by pushing for CBDC (Central Bank Digital Currency). As we speak, it’s estimated that roughly 83% of the world’s central banks are looking at creating their own CBDC version. China’s CBDC is the only digital currency in which has already being pushed to use by its citizens, and this means China’s CBDC has progressed the most out of all CBDC projects out there in the world. As we speak, Canada, Sweden, and few other countries are further along but behind China in terms of making progress in creating a CBDC system. The United States is unfortunately way behind many other countries in creating its CBDC system.
As China makes progress in creating and promoting and updating its CBDC system, the unintentional or intentional, depending on who you’re asking the question, advantages that come with the creation of this CBDC system is that many countries who are signed up to be a member of BRI (Belt and Road Initiative) may adopt China’s CBDC sooner than we could have imagined for trades on the global stage. How come? Perhaps, using China’s CBDC for conducting trades could cut down the costs of transactional fees, and the digitalization of the logistic application such as clearing customs and so on could be done on the blockchain (which underpins China’s CBDC) smoothly. For example, country A bought huge containers of China’s export for its own import need could just open up an app and with a few clicks here and there — the logistical digitalization through the usage of CBDC — and can order many huge containers of products to be imported without needing to file paper works online or offline for clearing customs and paying huge currency conversion fee and whatnot — meanwhile, the app would show when and where the products have been moved and when will the product arrive on the doorstep of country A.
After watching the video right after the break, you might as well be as educated on the topic of digital currency as I am since the information I’ve shared in the post was learned from the video itself. I have no affiliation with the people in the video right after the break, and I’m sharing the video since it got so much important information about our future. For example, the speakers in the video mention that through Alipay and Wechat, Chinese people become cashless society but China’s CBDC won’t replace Alipay and Wechat but rely on these two platforms to get popular. Another example is that the speakers mention how the digitalization of currency could do away with overdraft protection fees in which the poor are most likely being affected — as we speak 30 billion dollars of overdraft protection fees could have been conducted annually if my understanding of what the speakers have conveyed is correct.
In summary, I think China’s CBDC may displace the dollars on the global stage but won’t replace the dollars on the global stage. To the best of my understanding from watching the video, I could understand that China’s CBDC will allow countries to use CBDC to cut costs and time in conducting trades with China on the global stage. Since China has been pushing for closer ties with BRI members, I could see BRI members will rather use China’s CBDC over the dollars in the longer term. This means China’s CBDC will displace the dollars on global trade but the Dollar will still be a reserve currency for some countries that want to do trade in dollars on the global stage. The dollar won’t go away but the Dollar may lose influence to China’s CBDC over a longer period. This is why the United States too may have to push hard on creating its CBDC system to compete against China’s more progressive and developed CBDC system as we speak. If the United States doesn’t do so, I fear the United States will be way behind in competing against China in terms of trades and currency influence on the global stage.