The Digital Yuan and the Belt and Road Initiative

Central Bank Digital Currencies (CBDC’s) development by many monetary authorities around the globe has led to different discussions about the future of money and monetary policy. However, most of the debate has focused on the implications the new instrument could have on domestic economies, specifically developed economies involved in building a cashless society. Other projects have the intention or potential to enhance the central bank’s control over the economy by dealing directly with the public, surpassing the intermediation function of the banking system.

China’s project is different. A cashless system in China is already developed, and the state’s control over the banking system guarantees a high level of influence of the central bank over the economy. So, China’s CBDC has to be analyzed on its terms, as part of a bigger project, The Belt and Road Initiative. The digital yuan plays an important role in consolidating China’s position in the underdeveloped world, providing not only financial aid but also an alternative payment system based on the Chinese currency.

The paper analyses the implications of this strategy for China but also for Africa, one of the main recipient regions of Chinese foreign investment. It will address the possible implications for the construction of a multilateral region with the consolidation of a yuan-based region that will face the dollar power, but it will also emphasize the implications this strategy could have for African countries. Will the change from dollar to yuan will benefit the development of the region or will it just be a change of the ruler?