Can e-RMB "Make China great again?"

China is in need of reforming its economy. China is facing serious crises one after another and now maybe the time when they actually did something for it. e-RMB or digital Yuan, could be the the next big thing in China post Covid-19 this is the latest Chinese currency reform which has already begun with the trial runs in 4 major cities of China namely Shenzhen, Suzhou, Chengdu as well as Xiong’an.

  • The real reason for introducing the e-RMB- A lot of us have this major misconception that e-RMB was introduced to fight against the dollar and become a globally accepted currency or even for overtaking dollar, some thought it might help solve the problems of bubbles in the Chinese markets, but mainly it is done to smoothen the transaction processes. For most of us who do not know, the big international transactions between nations are carried on by banks using SWIFT which is a vast messaging network used by banks and other financial institutions to quickly, accurately, and securely send and receive information, such as money transfer instructions. Every day, nearly 11,000 SWIFT member institutions send approximately 33.6 million transactions through the network. But a few years back SWIFT was subpoenaed by the US government and thus they have direct access at their will over these records. Mainly this state-run digital currency aims at making China free from corruption in the form of black money held by the people a d monitoring the people as we all have seen and known that the Chinese have little to no regard for the Privacy of their people and a system like digital Yuan will allow them to tighten these norms, finally an independent from SWIFT and its interference, where both the sender and receiver of the money merely needs the application or platform to allow money transfer and it will be private and secure.

  • How will it compete against the USD- For the time being e-RMB will not be able to compete against USD in any way, but maybe because of the ease of access and ease of transactions people might switch to this currency for transactions but then comes the questions why just a digital yuan and why not a digital currency for every country? Why will all the countries rely on the Chinese currency, when every country will have its own currency, how will China be able to maintain its Monopoly as the USA does, firstly because of the lack of reputation China has, and again the USD is in every reserve of every country, has no tracking feature like the digital yuan, has no strength like USD because China maintains a weak currency due to its export-oriented mindset. Thus if we think China will defeat the dollar to become a global currency it will not be possible in the next 4-5 years.

  • How will it be controlled- The yuan will be of the same value as the physical yuan and will be state-backed meaning the printing and supply will be with PBOC and to set aside all the rumours and false beliefs of it being backed against "Gold" because that is not happening simply because the gold standard is no longer the wise thing to do and if one part of the currency is backed by gold and the other is not then it will be a hectic task for all of the people as well as banks and one will lose its credibility against the other.

[USD or Yuan, which is the stronger currency]

  • The major problems in the process of making it a success- The major problem here which China and PBOC will face are mainly maintaining the currency away from hackers and without any blockchain technology its control will be quite a hassle for the government similarly convincing companies to accept these payment methods again because of the goodwill of the Chinese, then comes the existence of the commercial Banks, Commercial Banks will have very less involvement if the Digital Yuan is issued, exchanged, monitored and even held out interests and if these interest rates a higher than what commercial and private banks can offer it will be really hard for these banks to survive in the competing world of China. Also, the functionality and ease of use will be a matter of concern but given China's Technological advances it is something not too grave a concern.

So finally, according to me the initiative if is done merely to check the corruption, create a more secure network for payments and increase overall ease of access for transactions then it will be a success, but if they are expecting it to defeat or even be stronger than the USD then it might not be a success. What they should do is straighten its foreign policies and to implement a plan for strengthening its currency until then China can by no means defeat the USD. So lets see how the digital currency will perform in the months after its release.

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