Former U.S. officials have warned that the Chinese Communist Party’s push for a digital renminbi will further penetrate the wallets of citizens through a “Belt and Road” system of Communist surveillance, in addition to diminishing the importance of the U.S. dollar.
The Washington Examiner recently reported that Chinese Communist Party officials dream of combining visibility for currency users with technological control as they stake their power on the ability to monitor and curb private activity.
“Acceptance of the digital yuan outside of mainland China could provide the Communist regime with an important geo-economic tool, one that could bypass the network of banks and financial institutions bound by U.S. law and bring client countries more directly under Beijing’s thumb,” The report reads.
Beijing’s push for a digital yuan comes against a backdrop of tensions between the U.S. and China, with former President Donald Trump (Trump) launching a series of challenges to the Communist Party’s long-standing unbalanced economic and trade policies while in office and new Joe Biden continuing Trump’s policies toward China. The Trump administration designated China as a currency manipulator in August 2019.
Before Trump, former President Barack Obama was similarly frustrated with Chinese officials, the report said, sources said.
Former deputy commerce minister: the Chinese Communist Party is spying on your spending money
On the Chinese Communist Party’s push for digital yuan security, former U.S. Deputy Commerce Secretary Nazak Nikakhtar cautioned, “Not being anonymous means the [Communist Party’s] central bank and central government will spy on you and how you spend your money. It is programmable.”
She previously led the Industry and Analysis Group of the International Trade Administration at the Department of Commerce.
“They (the Communist Party of China) are trying to create a (dollar) substitute,” warned Nikakhtar, “basically, to build an epicenter and hope it acts like a magnet to draw everything from the United States to other centers.”
Experts believe the digital yuan is the latest move by the Chinese Communist Party to threaten the U.S. dollar, long the currency of choice for global commerce.
Chinese Communist Party experts avoid admitting they have a plan. Former People’s Bank of China Governor Zhou Xiaochuan said in December, “The yuan can be used for trade and investment if you want to use it, and we have no ambition to replace the existing currency.”
Takahide Kiuchi, chief economist at Nomura Securities, told Kyodo News in April, “If the internationalization of the yuan is steadily promoted, the competitive landscape between the dollar and the yuan will change sharply.”
The Wall Street Journal reports that China (the Chinese Communist Party) is leading the way among major economies by creating a digital yuan; it would allow the Communist government to track individual spending in real time, while it is designed to be unconstrained by the global financial system dominated by the U.S. dollar and could also weaken the impact of U.S. sanctions.
The Chinese Communist Party may use the Belt and Road to promote the digital yuan
It is widely believed that the Communist Party’s overseas “Belt and Road” initiative, which is seen by U.S. officials as a “predatory” lending scheme to developing countries, has become a target for the Communist Party to promote the digital renminbi, which it hopes will become an international financial instrument. into an international financial instrument.
Julia Friedlander of the Atlantic Council said, “If it’s a long-term loan …… it [the Chinese Communist Party] will expect that foreign actor to pay it back in digital renminbi.”
“This is an attempt to create areas of dependency, for example, Belt and Road has created some kind of debt trap diplomacy. (Now) this is currency diplomacy, in just a different way.” She added.
Friedlander was a senior official in the Treasury Department’s Office of Sanctions and served on the White House National Security Council from 2017 to 2019 during the Trump administration.
Digital RMBs May Provide Terrorists with a Channel of Refuge
The digital yuan could be an avenue for terrorists or rogue states to evade U.S. sanctions.
A Senate Republican aide who was not authorized to speak publicly told the Washington Examiner, “If the yuan had this sub-domain and became a reserve currency for the ‘Belt and Road,’ U.S. sanctions against banking entities that are in direct violation of sanctions orders would become less lethal. “
But he also downplayed the impact of the digital yuan on the U.S. dollar. “The digital yuan is not a direct threat to the U.S. dollar, and there’s really no difference between the digital yuan and China’s (Communist Party of China) banking system, just as there was before,” he said.
He speculated that this is a move by the Communist government to satisfy the Chinese public’s demand for alternative digital currencies and cryptocurrencies before trying to take control of the new system.
Some analysts agree that the digital yuan represents a step toward the “internationalization” of the renminbi, but there is a clear divide in Chinese media coverage over the perceived dangers of the move.
In a recent assessment, Belt and Road News, a Hong Kong-based media outlet, said the digital yuan will not pose a serious threat to the U.S. dollar unless Beijing addresses issues such as corruption and Communist Party control over demand.
Former Official: U.S. Should Establish Digital Currency Framework Excluding CCP as Soon as Possible
For her part, former U.S. Undersecretary of Commerce Nikakhtar expressed skepticism about these understatements. She said such claims underestimate the willingness of Western governments and businesses to pursue short-term gains.
She said federal officials should launch a U.S. digital currency sooner, while negotiating with multilateral institutions to develop a “digital currency framework” that would exclude predatory behavior by the Communist Party.
“Establish at least the international principles needed for a digital currency framework so that gravity does not move in the direction of China (the Chinese Communist Party),” Nikachtar said, “and, at the same time, help other countries launch their digital currencies and shape what is needed through that framework.”
Fed officials remain confident in the dollar’s dominance and are in no hurry to develop a digital currency like China’s.
When Senate hearings in April mentioned whether the dollar could be digitized to help the U.S. defend its position, Fed Chairman Jerome Powell replied that studying the issue was a “very high priority item.”
“We don’t need to be the first (to issue a digital currency),” he said, “we need to get things done.”
Powell said earlier that the dollar is the world’s main reserve currency and there is no need to rush to issue a digital currency.
“A dollar CBDC (central bank digital currency) would have a potentially huge impact here and around the world.” He said, “We will certainly consider all of these issues carefully and engage very broadly with the public around the world, particularly here in the United States, before we get any closer to making a decision.”