China is gearing up to introduce its digital yuan to the ASEAN nations, with plans to explore “cross-regional use” of its Central Bank Digital Currency (CBDC) within the bloc. While some ASEAN members have close political ties to China, others maintain stronger connections with Washington. Cities like Nanning and Fangchenggang in the Guangxi region are set to establish a digital yuan application pilot demonstration zone for ASEAN. Fangchenggang, as China’s southernmost port city, plays a pivotal role in trade with ASEAN nations, while Nanning hosts the China-ASEAN Plaza and the annual China-ASEAN expo.
Cities Leading the Digital Yuan Demonstration Zone
The new zone will focus on “free trade” initiatives designed to enhance China-ASEAN cooperation. The Bank of China, a state-run commercial bank, has been actively exploring potential applications for the digital yuan across ASEAN. Its local branch has participated in commercial tests for a multilateral CBDC bridge project, jointly led by the central banks of four countries. These efforts bring China closer to achieving a “breakthrough in the cross-border use of the digital yuan.”
China has long aimed to promote the yuan as an alternative to the US dollar in international trade deals. While initially cautious about involving its CBDC in these endeavors, Beijing’s stance has shifted this year with the launch of “cross-border” CBDC pilots in Hong Kong and Macau. These developments indicate China’s willingness to explore the international potential of its digital currency.
The Drive for Cross-Border Digital Yuan Use
ASEAN nations have been actively pursuing de-dollarization initiatives, and China hopes its digital yuan can help address the challenges arising from these efforts. Several ASEAN countries, including the Philippines, Indonesia, Malaysia, Singapore, and Thailand, have adopted dollar-free “contactless QR code payment systems” to reduce reliance on USD intermediaries. Cambodia, an early adopter of CBDCs, may seek to explore CBDC-powered trade with China. Indonesia, with its recent launch of a de-dollarization task force, is also investigating its own CBDC options. The Bank of Indonesia expressed its desire to include “cross-border” usage in its digital rupiah project framework, further emphasizing the importance of CBDCs in international trade.
China’s precise stance on CBDC cross-border interoperability remains undisclosed, but its active engagement with ASEAN countries suggests a willingness to expand the reach of its digital yuan within the region.