China emphasises and promotes the use of its own central bank digital currency (CBDC), the digital yuan, as the domestic currency surpasses the US dollar to become the country's most popular currency for international transactions.
The transition away from the dollar as the world currency has begun. It has been going on for a long time, months even.
The Russia–Ukraine war, which followed the implementation of economic sanctions by the Western bloc against Russia, set in motion this process.
Yuan on the Rise
In March, the yuan surpassed the dollar as the most frequently used currency for cross-border transactions in China, according to official data, reflecting Beijing's efforts to internationalise the yuan.
Cross-border yuan payments and receipts reached a record $549.9 billion in March, up from $434.5 billion the previous month, according to a calculation by Reuters based on data from the State Administration of Foreign Exchange.
The use of the yuan in international trade finance remains minimal, despite consistent growth.
But a global appeal of other major currencies has started as countries struggle with a shortage of US dollars to fund their international purchases.
Many countries have been pushed into a deep economic and financial crisis from low forex reserves, and as such there has been a push for settling trade in currencies like the yuan.
A paper currency's worth as money is determined by what it can be exchanged for in the real world.
Read more: China's Confusing Tunes on Crypto Regulation
In this context, oil and gas are the most important energy sources.
Throughout the lifecycle of the oil economy, oil held the mantle of "new gold," a moniker that was only recently acquired by digital data thanks to advances in computer software.
Now with new technology such as blockchain, a central bank digital currency has gained prominence.
Some countries' central banks have issued their own digital currencies, known as central bank digital currencies (CBDCs).
They function similarly to cryptocurrencies, but their value is pegged to the national fiat currency by the central bank.
CBDCs are being developed and implemented in several countries.
China has been a leader among nations developing CBDC - central bank-issued digital currency - although adoption is still in its infancy.
But the appeal for a digital yuan is on the rise and China is taking advantage of the situation.
A Reuters report showed stocks tied to China's digital currency, the digital yuan, rose on Monday despite a generally lacklustre market, thanks to the government's recent efforts to boost the digital yuan's use.
Shares of Newland Digital Technology Co and Northking Information Technology Co had risen, while those of Global Infotech Co jumped 13%.
According to a story in the state-run Securities Times on Sunday, starting in May, civil officials and other public sector personnel in Changshu, a subordinate city of Suzhou in the eastern Jiangsu province, would be paid in digital yuan.
Wang Pengbo, Senior Financial Analyst at BoTong Analysys consultancy told Reuters, "Using e-CNY to pay salaries will help popularise the digital currency."
Dan Wang, Chief Economist at Hang Seng Bank China, referring to the digital yuan told Reuters, "The development marks the latest trial China is doing to promote its e-CNY."
Read more: Hong Kong Launches Web3 Institute With Tacit Support of Beijing
Reuters found that 48.4% of all international trade was conducted in yuan, down from 48.6% the previous month.
The total amount of international trade includes both the current and capital accounts.
In March, the yuan's proportion of worldwide currency transactions for trade financing increased to 4.5%, according to data from SWIFT, while the dollar's share decreased to 83.71%.
So, the push to a digital central bank currency by China seems to have a deeper reason than just a counter to cryptos.
Like what you read? Our weekly Business Bulletin wraps up the most important business and economic developments in the industry, along with macroeconomic views and opinions. To avoid FOMO and access member-only features, click here to subscribe. It's free.