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China-driven CBDC Push Essential to Asia’s Digital Society Move in 2022

The Asia Pacific (APAC) region will take major steps to become a digital society by 2022 and the use of central bank digital currencies (CBDCs) will play a key role in the process, the VP and Research Director at research and advisory company, Forrester, has said.

Michael Barnes said the CBDC usage, already spearheaded by China as a major economy, is one of the three key pillars that will uphold the APAC region as it pulls far ahead of other regions particularly North America in terms of becoming a digital society in the coming year. The other two pillars he mentioned according to their findings are access to digital government services and cross-border digital frameworks for data interoperability.

“Asia as a whole is pushing forward but it’s very much China-driven from a global standpoint,” Barne said about the growing CBDC interest across Asia in a recent Forrester podcast in which he touched on the company’s prediction for the region in 2022.

“To give some numbers for context, it’s early days yet but China is miles ahead than any other market either in regions or globally in terms of pushing forward with the digital currency,” he adds, pointing out that more than 20 million Chinese consumers have already used the digital yuan in China while there are planned trials in Japan, India and Australia.

China has been trialling the digital yuan across many major cities ahead of next February’s Beijing Winter Olympics which is expected to be the next key step in the pilot to the rollout phase. About 1.55 million merchants can now accept digital yuan’s wallets to cover utility payment, catering services, transportation, shopping and government services, according to a Chinese government official. Some 140 million people have reportedly created digital yuan wallets as of October.

Barnes believes the most obvious driver behind China’s push regarding its CBDC project is the country’s resolve to make the yuan become a leading global currency.

“Right now, China is the second largest economy in the world but the yuan is not a global currency by any measure and they are looking to change that and having a very strong well-supported broadly-used digital currency and being so far ahead of other markets in delivering on that is a key way to drive that usage globally,” he said.

He also talked about how the rollout of the digital yuan is going to benefit China in terms of improving financial inclusion locally. Like every other market on earth, he says China is slowly moving away from cash as a society which is good in a way.

“Moving to cash actually exclude 225 million people who don’t have bank accounts,” he said. “These are folks outside urban areas typically. They are being excluded essentially from this opportunity (potential). So, China, pushing the digital currency that ultimately won’t require bank accounts is a way to include those folks in the economy.”

With at least a billion people in the APAC region expected to access government digital service in 2022, Barnes says the region will extend its lead over other regions in the coming year as more processes are simplified and cross border collaborations improved.

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