China’s Digital Yuan Works Just Like Cash—with Added Surveillance

While results from the expanding trials have been modest so far, Yaya J. Fanusie, a senior fellow at the Washington, DC, think tank the Center for a New American Security, says fast adoption is not yet China’s main priority. The central bank is building the infrastructure needed to enable sweeping adoption in years to come, signing up merchants, adapting the banking system, and developing applications such as a way to earmark money for health care or transit, he says. That lays the groundwork for eCNY to be China’s default payment system in 10 to 15 years, and it has been enough to put the project ahead of any other government-backed digital currency.

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Earlier this month India’s central bank said it would begin rolling out a digital version of the rupee. Brazil planned to launch a digital real this year but has pushed back its rollout to 2024. The European Central Bank is studying whether to roll out a digital euro, and US president Biden and some members of Congress have called for research into developing a digital version of the dollar.

China’s project is motivated in part by its leadership’s awareness of how the country has played catch-up in earlier technologies, from space exploration to the internet. President Xi Jinping regularly calls for China to take the lead in developing the digital economy. But Emily Jin, who researches the country's economy at the Center for a New American Security, says the project has political as well as economic motivations. “Chinese policymakers are trying to not just create a technical infrastructure, but an institutional environment that makes this kind of currency that has social control implications more acceptable in the long run,” she says.

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