China’s Digital Yuan: Changing the Future of the Modern Economic System

Chinas Digital Yuan: Changing the Future of the Modern Economic System

Elin Boyce, Writer

Historically, the United States has had a strong lead on the economic system, but as of 2021, many are noticing China’s astonishing recent growth. China’s digital currency is making waves in the present economy. 

 For more than sixty years, the US dollar has been the reserve currency. This provides the United States with a substantial advantage in the economy. After World War Two, the United States possessed two-thirds of the world’s gold reserves. These gold reserves contributed to an economic system called the “Bretton Woods Economy.” This system is often credited with the development of our modern economy. The IMF and the World Bank were created in order to support a country in the situation that it were to be in an arduous scenario. It was this system, in 1944, that insured the gold-based dollar as the international reserve currency. Although this system was abandoned in the 1970’s-likely due to the fact that the US was printing currency at a higher rate than gold production, causing other countries to convert their USD to US gold for a more substantial transaction- it has secured a hegemony for the US in the modern international economy. 

China’s recent substantial economic growth has led to suspicions that China’s economy will grow larger than the United States’ as soon as the next ten years. China had a quick recovery from the economic crisis during the pandemic, providing an ascendancy for China’s post-pandemic economy. This led to many advantages, including the ability to pilot a foreign type of currency, digital currency. Digital currency is not like Venmo, or Apple Pay. These transactional mediums are all just ways of transferring money from person to person or bank account to bank account using data gathered inside the application. However, CBDC is a currency in itself. The money is not being transferred:the money exists solely virtually. 

Digital currency is represented by code. There are many advantages to this format. Unlike a typical transaction, the digital yuan does not require an internet connection, only a charged device.. Another factor that could cause people to turn to this modern currency is that this system requires no bank account, storing everything in the code at no cost. The transfer is also an easy process, the familiar ATM is used in order to relocate your yuan. Whether it’s in your best interest to go full digital or transfer digital yuan to tangible yuan, the process is simple and easily identifiable.

Within the short period of time this system has been piloted, mostly along the Yangtze River, it has already gathered enough circulation to purchase the Eiffel Tower, seven Lamborghinis, Leonardo DaVinci’s Salvator Mundi, one million acres of land on the moon, and Taylor Swift’s home roughly one hundred and thirty two times. Needless to say, this system is not your high school student’s garage-level project, it’s permeating all throughout China, and likely will be fully established and ubiquitous within our lifetime. Unlike  the “Bretton Woods” economic theory, there is no longer a need for a reserve currency in the age of technology. 

Many countries have been taking part in bilateral trade agreements, including the European Union and Japan, and Russia and China, who have begun excluding the USD from their new acts of commerce. This could potentially be the future of every transaction made. It’s also possible that China’s yuan could become the reserve international currency in the future. Although the United States has the largest economic power in the world, China is the world’s largest trading partner. The United States has threatened to remove China from US stock exchanges on occasion prior to the introduction of CBDC. It is possible that China could retaliate if they do take control of the economy eventually and deny the United States access to infrastructure, which could detriment the United States severely as denial of infrastructure doesn’t allow trade with the rest of the world, or at least those connected to this specific system. 

Along with the convenience of the system, many are likely to jump on the bandwagon due to the possibility of a hegemony in this political and economic reset, especially in more impoverished countries in Africa or Asia, who are allies of China. This is an example of mutualism: China’s digital yuan is taking off, and the countries supporting this development will have the potential of higher success than in our current economy. China’s graceful emergence from the pandemic could potentially change the outcome of our entire economic future. Nothing is guaranteed, but if this new form of currency turns out to be anything similar to the United States’ success after World War Two, it is likely the US might not stay on top..,the%20IMF%20and%20World%20Bank.,or%20even%20a%20bank%20account.,Yangzi%20)%20River%20to%20the%20south.