Chinese academic claims digital fiats will help de-dollarize.

Chinese academic claims digital fiats will help de-dollarize.

China’s De-Dollarization Plan: The Role of Digital Fiats

Digital currencies are expected to play a significant role in China’s de-dollarization plan, according to Huang Qicai, the Deputy Director of the Fujian Academy of Social Sciences. In an opinion piece for Guangming Daily, which was later republished by the People’s Daily, the official newspaper of the Chinese Communist Party, Huang explained that many nations are already in the process of de-dollarization. He believes that this will eventually lead to a “world currency multi-polarization” as nations aim to decouple from the USD.

While Huang acknowledges that this will be a long-term process, he suggests that digital fiats, such as China’s digital yuan, could play an innovative role in de-dollarization. He envisions the emergence of a super-sovereign “world currency” as digital currency applications continue to mature, potentially becoming the new center of the international monetary governance system.

However, Huang does not explicitly state that the digital yuan could fulfill this role. Instead, he mentions the BRICS payment platform BRICS Pay, which is currently under development. BRICS Pay aims to be a digitized and decentralized digital payments platform. It remains to be seen whether BRICS member states will integrate their central bank digital currency (CBDC) projects with BRICS Pay.

China, Russia, and Brazil have made notable progress in their respective digital currency projects. Huang suggests that CBDCs can play a role in de-dollarization as long as interoperability issues can be resolved. He proposes the concept of “digital currency bridge projects” that would enable bilateral or multilateral cross-border transactions with CBDCs.

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In addition to digital currencies, Huang emphasizes the importance of reducing the dominance of the SWIFT bank messaging system, which is controlled by the United States. He suggests that it is necessary for Chinese allies to vigorously promote de-dollarization in key areas such as energy and commodities. To achieve this, Huang recommends the use of currency swaps and settlement agreements with commodity-producing countries using local currencies and the yuan. This approach would gradually loosen the relationship between oil and the US dollar.

Overall, Huang Qicai’s article sheds light on China’s de-dollarization plan and the potential role of digital fiats in this process. While it is still unfolding, the advancement of digital currencies and the establishment of international cooperation among nations could pave the way for a new global monetary governance system. With ongoing progress in CBDC development and addressing interoperability challenges, digital currencies have the potential to contribute to a more multi-polar world currency system.

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