Chen Bo: Correctly understand the connotation of digital RMB internationalization

With the launch of the digital RMB pilot, the issue of the internationalization of the digital RMB has been hotly debated recently, among which the most discussed is the relationship between the digital RMB and the digital dollar. Many people believe that the digital RMB will challenge the hegemony of the US dollar. The United States also attaches great importance to this topic, and there is even a tendency to regard the digital RMB as a national security threat.

There are significant differences in the current development paths of digital currencies between China and the United States. China has issued a separately managed central bank digital currency, while the United States has not yet clarified this plan and has only achieved its influence on the digital currency system by identifying existing US dollar stablecoins. For example, the Office of the Comptroller of the Currency of the U.S. Treasury Department, the largest banking regulator in the United States, announced that it would allow U.S. banks to use public blockchains and US dollar stablecoins as settlement infrastructure for the financial system.

The difference in the digital currency technology routes between China and the United States is caused by the status of traditional currencies. The U.S. dollar is already the dominant force in the global monetary system. The significance of issuing digital dollars alone is limited, but by connecting with existing stablecoins, the goal of dollarization of the global digital currency system can be achieved more effectively. The renminbi is in a weak position, and issuing independently managed digital currencies will help the renminbi enhance its dominant position.

However, whether the digital RMB can challenge the status of the US dollar or the digital dollar is a question that needs to be carefully evaluated. To answer this point, we need to have an objective understanding of the essence of the digital RMB. According to the latest research report of the IMF, central bank digital currencies can be divided into retail and wholesale types. The former is used for small transactions, and the latter is used for large transactions. At present, the retail digital currency is developing rapidly, while the wholesale type has not yet entered the mainstream. From the attribute point of view, my country's digital RMB belongs to the retail central bank digital currency, and it does not bear interest and is mainly used to support consumption scenarios. The monopoly position of the US dollar is mainly reflected in its pricing power in large transactions. For example, global commodities are priced in US dollars. Therefore, it is unlikely to challenge the status of the US dollar through retail digital currency in terms of market share.

However, the significance of the internationalization of the digital RMB lies in participating in the formulation of international rules. Digital currency has the dual attributes of monetary policy and payment tool. As a monetary policy, digital currency can be precisely distributed to certain specific groups or consumption scenarios through "non-linear issuance" compared to traditional currency, while traditional currency can only be spread in a scattered manner. Therefore, digital currency will become an important monetary policy supplement as a precise and targeted tool. As a payment tool, compared with the traditional bank account system or Internet payment system, digital currency has higher circulation efficiency and traceability, and has lower infrastructure requirements. It is a breakthrough in payment technology. According to the classic Fisher exchange equation, a faster currency circulation speed can create more economic output. It is precisely because of the above-mentioned technical superiority of digital currency that it has the potential to become an important tool for changing the international rules of the payment system, which is also the main concern of the United States on this issue. However, it is also very difficult for the United States to promote the issuance of legal digital dollars. Because once a digital monetary policy similar to that of China is implemented, it means that the mature domestic Internet payment system will be greatly impacted, and it will face obstacles from interest groups. Therefore, the current development of the digital dollar is mainly to promote the dollarization of the existing digital currency system, that is, to anchor assets related to the US dollar.

For China, expanding the influence of the digital RMB requires consideration from three aspects: first, it is necessary to accumulate successful pilot experience as soon as possible, form a practical basis for its issuance rules, market demand, etc., and especially to form a differentiated positioning from the Internet payment system and occupy a place in the domestic consumer market; second, it is necessary to actively promote the "digital currency + scenario" strategy, closely combine digital currency with public welfare applications such as poverty alleviation, green consumption, and inclusive finance, and enhance its non-monetary value as a monetary policy tool; third, it is necessary to focus on creating a digital currency governance model with international standards, and incorporate elements such as consumer privacy protection, information accessibility, and gender equality into the evaluation system. Overall, it is imperative to actively establish a good international image and credit foundation for the digital RMB and strengthen international cooperation and exchanges, because consumers ultimately vote. (The author is the director of the Digital Finance Research Center of the Central University of Finance and Economics)