China’s 5-Year New Development Plan to Include the Development of DCEP
Riding the wave of several hugely successful trials of its upcoming digital yuan, China has announced the launch of a new five-year development plan. The plan was adopted during the Fifth Plenary Session of the Nineteenth Central Committee of the Communist Party of China (CPC), and includes recommendations for the development of China’s financial and business sector.
According to a document authored by Chen Yulu, the Vice President of the People’s Bank of China (PBoC), the construction of a new development pattern is an important indicator of China’s economic and social development. And while most of the plan is focused on establishing a stable monetary policy that will be able to handle both the repercussions from the ongoing COVID-19 pandemic and the ambitious growth planned for its industry, a notable portion of the document is focused on the digital yuan.
One of the major goals to be accomplished in the next five years is to build an independent and autonomous financial infrastructure in China, Chen wrote in the document. This will be done both through strengthening the existing infrastructure and promoting the construction of new payment channels and ways to manage them.
Security was highlighted as the most important characteristic the country’s financial infrastructure is set to have. The document also presents one of the possible solutions that will provide security—the digital yuan.
“Accelerating the development and control of central bank digital currencies will ensure payment security,” PBoC outlined in the document.
And while there was no explicit mention of the digital yuan that is currently being tested by various local governments and banks across China, the technology underlying the digital national currency is set to be utilized in almost every step detailed in PBoC’s plan. For example, the bank put a heavy emphasis on strengthening research on financial technology innovation and its application in the construction of financial infrastructure in the country. While the description itself is rather vague, when seen in the context of heavy testing that’s being done across China, it becomes obvious that the central bank is pushing all development in the digital direction.
The Fifth Plenary Session saw the term “digital divide” heavily discussed, with PBoC officials stating that the vast difference between the poorest, unbanked people and the rest of China needed a lot of attention. According to Chen Yulu, the author of the plan, the country needed to go even more digital to bridge the “digital divide.”
Another context where the digital yuan could be utilized is in the bank’s effort to open up the country’s financial industry to the outside world. While this requires a lot of infrastructure investments in various “financial centers” across China, such as China and Hong Kong, serious changes would also need to be made to the financial market.
“We will implement a systemic and systematic liberalization [of the market] through a single system,” it said in the document. “We will steadily promote the internalization of the RMB.”