Third, Australia and other countries could be forced to accept e-CNY due to the sheer magnitude of Chinese trade and commercial interests. For instance, China could use programmable digital money to force countries to use e-CNY transactions and holdings in certain ways, freeze assets, or prevent access to any individual, company, or country it wanted. Second, it would give China’s government a powerful lever for imposing its own sanctions or coercing smaller countries in the region. First, such an outcome would insulate China from the risk of US sanctions, which today serve as a significant form of leverage and check against China. If China dominates the future infrastructure of international payments, it will use this as a powerful geopolitical tool with significant implications for the Indo-Pacific region and Australia’s interests in it. A CBDC is a digital form of central bank money, or, in other words, a liability on the central bank that is distinct from traditional reserves or settlement accounts held by commercial banks at central banks. Lesser known is the government’s new state-led initiative to create a central bank digital currency (CBDC), known as ‘e-CNY’’ or ‘digital yuan’. 1 Many of us are familiar with popular Chinese fintech payment platforms such as Ant Group’s Alipay and Tencent’s WeChat Pay, as they are commonly accepted forms of payment for Australian retailers and merchants. Not only is China seeking to lead in fintech technologies, just as it has sought to do with 5G telecommunications and artificial intelligence (AI), it is also attempting to establish new cross-border and international payment systems that could be competitive alternatives to the current US dollar and SWIFT-based systems - leading to more Chinese control over global digital transactions.Ĭhina now has initiatives led by both the state and the private sector to boost the global influence of its fintech capabilities. While digital payments may not be as tangible as semiconductors nor as controversial as next-generation telecommunications, they play a critical role in shaping international relations, trade, currency dynamics, and economic growth.Australia should be attentive to these developments. The Chinese government believes that unlocking digital value is the key to furthering its technological, economic and geopolitical objectives. China is investing extensive resources and capital in developing new financial technology (‘fintech’) rails, platforms and products.
From 15 th century Florentine innovations in banking to new public debt and equity markets during the ‘Dutch Golden Age’ of the 17 th century, financial developments and improvements have played an important role in the rise of states and empires. Throughout history, financial innovation has often been a precursor to geopolitical clout or hegemony.
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