Monday, May 3, 2021

How Will the Digital Renminbi Change China? — Shang-Jin Wei

China's new digital renminbi by itself will not help the currency to challenge the US dollar’s global dominance. Its true significance instead lies in its potential to shift the competitive balance of power between the country’s technology giants and traditional banks.…

The post also contains some interesting details about the digital RMB. (The RMB is the name of the currency, while the yuan is the unit of account.)

Project Syndicate
How Will the Digital Renminbi Change China?
Shang-Jin Wei, a former chief economist at the Asian Development Bank, is Professor of Finance and Economics at Columbia Business School and Columbia University’s School of International and Public Affairs


hoonose said...

Does the digital RMB just happen?

As in money creation from thin air taken from ad lib all the way to infinitum?

Tom Hickey said...

All state currency is institutional. Institutional arrangements vary. I am not clear on exactly how the digital RMB will work, and apparently that has not be finalized yet. For example, I had previously surmised that this would involve public accounts at the PBOC. That seems not to the case according to the article.

It seems from the article that the initial purpose of the digital RMB is domestic, aimed at balancing the role of Big Tech and banks. Big Tech has the advantage now, and the regulators are alarmed that Big Tech have too much power over finance and the economy relative to banking.

So tighter regulation is being imposed in Big Tech and banks are being given a technical upgrade at the same time.

The digital RMB would therefore be about an electronic payments system similar to Big Tech that would enhance banks by reducing the advantage of Big Tech.

Anyway, that is what I surmise at this point. The digital RMB is still in trial, so the final arrangements won't be clear until roll out at scale.

hoonose said...

I hate to plagiarize, but this is just too good!

Money for Nothing, Checks for Free - I Want My, I Want My MMT