China’s central bank digital currency (CBDC) could give it more leverage over international companies that are required to use it, Yaya Fanusie, a senior fellow at the Center for a New American Security, said on the second day of Consensus 2021.
The digital currency, or “eCNY” as it is known, could give China “a little more leeway for economic retaliation,” according to Fanusie.
He provided the recent example of H&M being “pretty much booted off the digital presence within China,” because of some statements the Swedish clothing company had made around concerns about the use of forced labor targeting the Uyghur Muslim population in Xinjiang.
“Imagine if H&M and other foreign companies were required to [accept] eCNY for retail transactions – might it be easier to cut off transactions to them or to companies from countries that had a political dispute with China?” Fanusie asked.
Fanusie was responding to the question about whether a Chinese CBDC could displace or undermine the U.S. dollar as the world’s reserve currency, fears that he said are “overblown.” The variables that affect whether the dollar is the top currency are “big structural issues that aren’t going to be displaced or offset just due to the introduction of a new digital currency,” he argued.
The eCNY has been in pilot testing in 10 cities around China over the last year with aims of being offered to foreign athletes and visitors at next year’s Winter Olympics in Beijing. This would be the eCNY’s first test with international users.