China’s Xi Jinping sees CBDCs as key to expanding Belt and Road Initiative

China’s President Xi Jinping recently made comments that suggest he sees central bank digital currencies (CBDCs) as a key to expanding the country’s Belt and Road Initiative and increasing cooperation among the country’s global partners.

At the 2023 Shanghai Cooperation Organization (SCO) Summit held the first week of July, Xi discussed the creation of sovereign digital currencies, also known as CBDCs, to help improve currency settlements between SCO member states.

The SCO was established by China and Russia in 2001 as a regional organization focused on political, economic, and security cooperation.

A major point of focus for Xi was on “practical cooperation” that could help “expedite economic recovery.”

“Promoting economic growth is a common task for all countries in the region,” he said. “China stands ready to work with all sides to implement the Global Development Initiative, keep to the right direction of economic globalization, oppose protectionism, unilateral sanctions and the overstretching of national security, and reject the moves of setting up barriers, decoupling and severing supply chains.”

Xi mentioned the Belt and Road initiative, and said the SOC should promote “trade and investment liberalization and facilitation, speed up the development of port infrastructure and regional and international logistic corridors, and ensure stable and smooth functioning of regional industrial and supply chains.”

To help with achieving these goals, Xi proposed that the SOC “scale up local currency settlement between member states, expand cooperation on sovereign digital currency, and promote the establishment of an SCO development bank.”

Sovereign digital currencies are currently being explored by 130 countries representing 98 percent of global GDP, according to the Atlantic Council. A recent survey conducted by the Bank for International Settlements found that 93% of the world’s central banks are working on a CBDC, and there could be as many as 24 in circulation by 2030.

China is currently the most advanced when it comes to testing the use of a CBDC by the general public, with its digital yuan pilot ongoing in 17 provinces across the country, which includes 26 large cities and 5.6 million merchants.

“China is ready to share market opportunities and development experience, and implement the capacity-building program to empower young professionals,” Xi said. “China will carry out digital technology training programs in collaboration with the China-SCO Big Data Cooperation Center, and host an SCO national green development forum.”

On Tuesday, the Bank of China, one of China’s largest state-owned banks, announced that it was testing a new offline payment method linked to SIM cards for the digital yuan.

The bank partnered with telecommunication operators China Telecom and China Unicom to start testing the new feature, which will allow users to make payments with their phones by connecting the bank’s e-CNY app with “super SIM cards” that are equipped with near-field communication functions.

To make payments, users will only need to bring their smartphones in close proximity to sales terminals, and payments can be processed even when the phone is turned off. The bank noted that the SIM card payment features will only be available on certain Android phones and will be limited to specific pilot areas in China.