Chinese authorities plan to launch the state digital currency ahead of schedule to stimulate the economy amid toughening confrontation with the United States due to the spread of the coronavirus COVID-19 in the world.
China is accelerating work on its project to launch the digital renminbi to counter potential threats to the Chinese financial market from the United States and to stimulate the national economy on a large scale after the economic downturn caused by the coronavirus.
“Although the US hasn't put Chinese financial firms and institutions onto its Entity List, the US may still pose widespread threats to Chinese institutions and impact the yuan's standing in international settlement. In this regard, China's state-run digital currency may be rolled out sooner than expected to counter a possible US block,” Cao Yin, a Beijing-based blockchain industry insider, told the Global Times.
Yi Gang, governor of the People's Bank of China (PBC), said that internal pilot tests of the central bank’s digital currency were launched in four cities, including Shenzhen in Guangdong in southern China and the new Xiongan New Area. Testing will also include working out scenarios for using the currency ahead of the Winter Olympics, which will be held in Beijing in 2022, according to the recent press release posted on the bank’s website.
“These tests are just routine work for the research and development (R&D) of the digital currency. No schedule for an official launch has been revealed,” Yi said.
In order to help rebuild the economy after the coronavirus pandemic stress, China intends to optimize its fiscal policy by raising the deficit-to-GDP ratio to over 3.6% and further reduce taxes and fees paid by corporations (by 2.5 trillion yuan, or $353 billion) in 2020). But there are fears that numerous small Chinese companies will not be able to achieve support measures.
According to Yi, the digital yuan will more effectively meet the needs of the population in foreign currency and will contribute to the convenience and security of payments in retail trade, and this in turn will entail the acceleration of the development of China's digital economy.