A blend of visibility of currency users and technical control is a monetary dream for Chinese communist officials, who have staked their regime on their ability to monitor and curtail private activity within China. The digital yuan’s acceptance beyond mainland China could give the regime a significant geo-economic tool, one that avoids the chain of banks and financial institutions that are directed to U.S. laws and forces client states more directly to Beijing.
Beijing's actions come amid tensions with the Biden administration as the new government in Washington proceeds calibrating its China policy after the Asian giant's strategies led former President Donald Trump to turn on its president, Xi Jinping, after spending years praising their claimed friendship. Before Trump, former President Barack Obama became equally frustrated with Chinese officials, sources said at the time. Now, it's Biden's turn.
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“There's no anonymity, which [means] the central bank and the central government is going to watch you and how you spend your money,” said former Department of Commerce assistant secretary Nazak Nikakhtar. “It’s programmable.”
China's moves with the yuan are only the most recent after the Trump administration in August 2019 said the country is a currency manipulator as experts see a threat to the American dollar, the currency of choice for global business. "If the internationalization of the yuan steadily moves forward, the competitive landscape of the dollar and the yuan would drastically change,” Nomura Research Institute executive economist Takahide Kiuchi told Kyodo News last month.
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Chinese monetary specialists say that their goals are simple. “If you are willing to use it, the yuan can be used for trade and investment,” former People’s Bank of China Governor Zhou Xiaochuan said in December. “We don’t have an ambition to replace existing currencies.”
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And still, the growing countries that have joined China’s vaunted Belt and Road Initiative, an overseas infrastructure investment project that U.S. officials regard as a “predatory” lending scheme, appear already to be victims of China’s determination to turn a digital yuan into a tool of international finance.
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“If it's a long-standing loan ... they’ll expect that that foreign actor will repay them in China's digital currency,” said the Atlantic Council's Julia Friedlander, a senior member of the Treasury Department’s sanctions office who did a stint at the White House National Security Council from 2017 to 2019 under Trump. “It's trying to create areas of dependency in the way that, say, Belt and Road has created sort of debt-trap diplomacy. It’s monetary diplomacy, in a different way.”
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