China digital currency: China, Hong Kong begin testing digital yuan as Beijing ramps up research into cross-border use

The People’s Bank of China and the Hong Kong Monetary Authority have begun ‘technical testing’ for cross-border use of the digital yuan

International collaboration has also accelerated between China’s central bank and its counterparts in Thailand and the United Arab Emirates

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The People’s Bank of China and the Hong Kong Monetary Authority have begun ‘technical testing’ for cross-border use of the digital yuan. Photo: Bloomberg

Published: 5:30pm, 2 Apr 2021Updated: 9:03am, 6 Apr 2021

China will expand cross-border use of its sovereign digital yuan “when the time is ripe”, with technical testing already under way with Hong Kong, the country’s central bank has said.

China is a world leader in the development of a central bank digital currency (CBDC), with 200 million yuan (US$30.4 million) already distributed in pilot projects across the country, including in cities like Shenzhen, Suzhou and Beijing.

Although China’s sovereign digital currency, the so-called Digital Currency Electronic Payment (DCEP), is designed largely for small retail purposes, cross-border application is feasible, Wang Xin, head of the People’s Bank of China (PBOC) research bureau, said on Thursday.

“When conditions are ripe and market demand calls, cross-border transactions in digital yuan can be settled,” he told a media briefing in Beijing.

The PBOC’s digital currency research institute and the Hong Kong Monetary Authority have begun testing it for cross-border use, Wang said.

Hong Kong is a major offshore yuan centre and jumping off point from which China can advance its ambitions to internationalise the yuan.

International collaboration has also accelerated between China’s central bank and its counterparts in Thailand and the United Arab Emirates. The nations are studying the use of digital currencies and blockchain technology in cross-border payments.