Analysts at the British Independent Strategy believe that the situation in Hong Kong allows China to test the state cryptocurrency without attracting the attention of outside observers.
Independent Strategy expert David Roche said the island would serve as a suitable testing ground for international payments using the digital yuan:
“Hong Kong provides China with an ideal experimental intermediate option before integrating e-CNY into a globalized world with internationalization – while maintaining political control.”
Roche explained that the digital yuan pilot project in Hong Kong is in line with the overall strategy of the PRC, according to which the former British colony serves as a bridge to the global financial system. He added that Hong Kong is considered an obvious choice as it is part of China but has a separate currency. Which is convenient for those who want to learn how to make international payments in digital yuan.
Industrial and Commercial Bank of China (ICBC) Senior Finance Manager Matteo Giovannini opined that “after the initial focus on retail payments, the pilot project will be extended to wholesale transactions.” The small scale of the pilot project, limited to the Great Bay area that combines Hong Kong, Macau and Guangdong, should not worry observers much, “since China has always taken a very cautious approach to pilot testing.”
Asian company All In Consulting CEO Stanley Chao agreed with Giovannini and added that the digital yuan’s monthly transactions will be in the billions of dollars in the future.
“It will be used first for wholesale transactions and then spread to international trade and banking, transactions in which can amount to billions of US dollars annually, if not monthly.”
Chao said that even a pilot launch would have serious international economic repercussions. Singapore, Malaysia, and Middle Eastern countries trading with China will be interested in the results of the pilot project as their central banks seek to develop their own digital currencies and “eventually link them to China’s e-CNY.”
Back in 2020, the Hong Kong Monetary Authority (HKMA) began negotiations with the People’s Bank of China to test the digital yuan for international payments. Last November, the Shenzhen city government announced that, as part of its cooperation with Hong Kong, the city of Shenzhen will allocate 10 million yuan ($1.57 million) to encourage companies using e-CNY in the Qianhai border region. At the end of 2021, China and Hong Kong launched the second phase of testing the digital yuan.
