China to launch its central bank digital currency soon?

• Reportedly, the Chinese central bank digital currency (CBDC) will be launching sooner than expected, despite the COVID-19 outbreak.
• The Chinese central bank has collaborated with many local firms like Huawei, Tencent and Alibaba to develop the currency.

The Chinese central bank digital currency (CBDC) was delayed indefinitely earlier due to the coronavirus outbreak. Now, however, as the nation is recovering slowly from the deadly virus, a Global Times report has said that the CBDC’s launch is closer than expected. 

By teaming up with several local companies like Huawei, China Merchants Bank, Tencent and Alibaba, the Chinese central bank has completed the currency development process. Between January 21st and March 17th, Alipay - the financial wing of Alibaba - has reportedly publicized five patents related to the future digital currency. This includes issuance, digital wallets, transaction recording, anonymous trading support and assistance in supervising and dealing with illegal accounts.

China’s approach to stabilizing its economy might significantly vary with the digital currency launch. Cao Yan, managing director of Digital Renaissance Foundation, believes that the People’s Bank of China should accelerate the development of the CBDC. According to him, there are two benefits to this. Firstly, it would establish China’s dominance in this new digitally-oriented world. Secondly, the currency would be more helpful during times of uncertainty.

If there is a chance China is considering lowering its interest rate into negative territory as a final option and directing such policy to commercial loans and lending, a circulated digital currency rather than M0 will be able to achieve that.