Zhou Xiaochuan clarifies the misunderstanding of digital RMB

Whether a currency can be widely accepted depends on the size of the economy, the volume of trade, the degree of openness, etc.

On May 22, the 2021 Tsinghua Wudaokou Global Financial Forum with the theme of "New Pattern, New Development and New Finance" opened in Beijing. At the meeting, Zhou Xiaochuan, the former governor of the People's Bank of China, clarified and explained misunderstandings related to the digital renminbi, and expressed his views on the modernization of the payment system and the internationalization of the renminbi.

Zhou Xiaochuan believes that China's digital currency (DC/EP, or Digital Currency/Electronic Payment) and digital renminbi (e-CNY) are not intended to replace the international status of the U.S. dollar.

"The development of DC/EP is mainly based on the modernization of domestic payment systems, keeping up with the pace of the digital economy and the Internet era, improving efficiency and reducing costs, especially for retail payment systems. The original design purpose and the direction of efforts are not In order to replace the U.S. dollar's status as a reserve currency and an international payment currency." Zhou Xiaochuan said.

He pointed out that the modernization and digitization of the renminbi payment system will help improve the status of the renminbi and increase cross-border use to a certain extent, but it will not help much. The internationalization of the renminbi depends more on system and policy choices, and on the progress of China's reform and opening up, rather than on technical factors.

Zhou Xiaochuan said that the central bank's promotion of DC/EP and e-CNY is not to replace the role of third-party payment. "The DC/EP plan is a two-tier system. The entire R&D team is organized by the central bank and is jointly developed by major commercial banks, telecom operators, and several major third-party payment institutions. Everyone is in the same boat. Although differences are inevitable, But after all, it’s on the same boat and there is no infighting."

Regarding the modernization of the payment system, Zhou Xiaochuan believes that if the payment system wants to move to a new level, its efficiency, cost and error correction capabilities need to be considered, and the modern development of the payment system in retail systems, wholesale transactions, international trade, cross-border remittances, etc. In terms of direction, China can focus on making a fuss about retail.

"Retailing is the customer's demand. With the development of mobile Internet, customers hope to use mobile Internet as the mainstream retail method, without too complicated and too diverse payment methods." Zhou Xiaochuan said.

Another worthy effort to modernize the payment system is cross-border remittances. Zhou Xiaochuan said that the difficulty of cross-border remittances is mainly technology and policy, especially when it involves cross-border workers remittances to their homes, remittances between developed and developing countries, and mutual remittances between developed countries.

"Although there are US dollars, yen, and euros, which are relatively efficient, developing countries have high costs and long time delays. Therefore, this is an opportunity to step up, but it cannot be solved by technical systems alone. It depends on the solution of the system and policy, especially when it comes to the exchange rate system and foreign exchange management. Some countries have foreign exchange controls." Zhou Xiaochuan said.

In terms of RMB internationalization, Zhou Xiaochuan believes that technology (such as DC/EP, cross-border RMB payment system CIPS) cannot be overestimated for the improvement of China's currency status. Whether a currency can be widely accepted depends on the size of the economy. , Trade volume, degree of opening to the outside world, etc.

The improvement of the renminbi’s status also depends on the currency’s ability to withstand shocks. Zhou Xiaochuan said that this is an institutional factor. China may further increase its reform and opening up in the future, and it will make more clear choices, and this choice It also depends on the path of development, the path of reform and opening up, and the balance of views.