According to people familiar with the matter, China is paying some US companies to install payment systems in China that allow customers to pay for their products with the new digital renminbi.
• China is well ahead in terms of central bank digital currencies
• The Middle Kingdom is likely to put pressure on US companies to allow electronic payment of the Chinese yuan
• The Winter Olympics as a test of the electronic yuan
Many countries are considering developing their own central bank digital currency (CBDC). China is one of the very advanced countries in this field. The People’s Bank of China (PBoC) has been working on a digital currency as legal tender since 2014. According to the PBoC, the digital renminbi, also known as e-yuan or e-CNY, should not replace cash, but rather exist alongside it.
The reason for the new focus on central bank digital currencies is the faster digitization of the financial sector and payment transactions. Thus, digital central bank currencies offer the potential to make national and international payment transactions more efficient. In addition, central banks want to prevent the loss of their sovereignty over currencies to the benefit of the private sector.
Is China putting pressure on McDonald’s and other US companies?
As the Financial Times reports, McDonald’s is already enabling consumers to use RMB digital wallets at 270 Shanghai locations as part of a pilot project. Now, in the context of introducing the digital renminbi, China will likely put pressure on the US fast-food chain, among other things, to expand its digital renminbi payment system to its restaurants across the country by the time of the Olympics. Winter Games are taking place. However, after the Financial Times article was published, McDonald’s stated that the move to adopt e-CNY was “a business decision made with the interests of customers” and that there was no pressure to do so.
According to a person familiar with the situation, Olympic sponsors Visa and Nike have come under pressure. However, the companies declined to comment, according to the Financial Times.
Winter Olympics as a test for e-CNY
Daryl Duffy, co-chair of the electronic renminbi project at Stanford University’s Hoover Institution, told the Financial Times that the introduction of the Chinese yuan into the Olympics is slower than planned due to the coronavirus epidemic. According to Duffy, China’s move is not about singling out American companies, but about building a broad base of cryptocurrency. Bao Lingao, of consulting firm Trivium, describes the Winter Olympics as “one of the testing places for the digital yuan.” “Imagine that all kinds of retailers, including domestic and foreign companies, are invited by the government to participate,” FT Linghao said.
No pressure on US companies?
According to the Financial Times report, a source close to China’s financial regulators denied that Beijing was putting pressure on US companies. State banks have been given the task of registering merchants who have benefited from free transactions with the electronic renminbi. The source confirmed that the Bank of China was trying to persuade merchants participating in the games to sign up, but they may refuse to participate.
Criticism from the United States
However, in the United States, people are sometimes very skeptical about the digital renminbi. US critics have called for a closer look at the currency’s security implications – such as Beijing’s access to financial transaction data, which could improve surveillance capabilities.
recalls Michael McCaul, the prominent Republican lawmaker on the House Foreign Affairs Committee. “Unfortunately, the companies that make this possible focus on next quarter earnings rather than the next quarter’s global bases.”
Eric Sayers of the American Enterprise Institute also warns of a powerful new tool China will have with e-CNY, which could also put pressure on global companies. In his view, “the administration, Congress and the community of thought and opinion should […] Investigate this issue and its multiple implications today, not just a few years from now, when it unfolds into a larger problem.”
Former CIA analyst Yaya Fanusi also worries that the digital renminbi could give China scope to harm foreign companies. According to the Financial Times, he cited China’s efforts at the beginning of the year. At the time, the Middle Kingdom wanted to punish foreign companies such as H&M and Nike for their statements about forced labor. According to Fanusie, this way the Chinese government could in the future prevent consumers from paying with e-CNY at stores of foreign companies that conflict with Beijing. “They are moving more under the control of the Chinese Communist Party. US and other foreign companies should be concerned,” Fanousi was quoted by the Financial Times as saying.
Finanzen.net Editorial Team
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