How does China plan to contest U.S. financial hegemony, and what does this contest mean for the power of the Chinese Communist Party (CCP) over China’s private sector economy?
A new report from the Center for New American Security examines the Digital Currency/Electronic Payment (DCEP) project, China’s latest efforts to develop and take advantage of technology in the financial domain. “China’s Digital Currency: Adding Financial Data to Digital Authoritarianism,” written by Yaya Fanusie (adjunct senior fellow in the Energy, Economics, and Security Program at CNAS) and Emily Jin (research assistant in the Energy, Economics, and Security Program at CNAS), details China’s efforts to yoke the development of digital currency to both the domestic and international interests of the CCP.
China is pursuing the Central Bank Digital Currency (CBDC) project for several inter-related reasons. It would give the Chinese government an unprecedented degree of insight into the functioning of the Chinese financial system, and consequently of the Chinese economy. The digital currency project gives the People’s Bank of China (PBOC), and thus the CCP, more control over the activities of firms within its borders, and especially over the powerful financial services and payment companies that have become critical to the functioning of the Chinese economy. Financial transparency would also support long-term efforts to achieve full convertibility of China’s currency, as well as enhance the ability of the state to fight crime, of both the digital and ordinary variety.