Foreign investors still doubt the PBoC's policies when it comes to the RMB exchange rate. Eswar Prasad, a professor of Trade Policy at Cornell University and a senior lecturer at the Brookings Institution, said that although China's digital yuan has increased the role of the renminbi as an international payment currency, the US dollar has been "almost no". he believes it won't make an impact ”.
In an opinion piece published in Project Syndicate, Prasad states that the Chinese government must continue to reform the country's financial markets and lift restrictions on capital flows to place both China's CBDC and its national cross-border payments system globally to strengthen its adoption.
Yuan Makes Significant Improvements
According to the professor, the Yuan has made significant gains in recent years, both as a payment instrument and as a reserve currency. He says that this can mostly be attributed to currencies like the Euro and British Pound:
"Even when the IMF adds the Yuan to the existing four currencies in the SDR basket and weighs 10.9% to it, we see that mainly the euro, pound and Japanese yen are gaining weight, not the dollar."
The Policy Will Not Change Soon
The People's Bank of China "still manages the renminbi exchange rate," said Prasad, adding that this policy will not change "significantly anytime soon."However, the professor explained that because other developing countries have solid trade and financial ties with China, they can "start billing and transacting directly" in the national currency and easily adopt the digital yuan once it is officially released.
China's Ministry of Commerce announced on August 14 that the country's central bank will expand its digital currency trials to include Beijing, as well as Tianjin and Hebei provinces.