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Saudi Arabia becomes part of China’s trial of yuan digital currency payments

As the digital yuan is having issues at home, a new trial is being conducted

In light of difficulties in its domestic market, China has initiated a trial for cross-border payments utilising digital currencies issued by central banks with Saudi Arabia, the United Arab Emirates, and other partners, according to Nikkei Asia.

The CBDCs make use of blockchain technology to record transactions. As per the People’s Bank of China (PBOC), they can reduce expenses by as much as 50% and facilitate cross-border payments in seconds.

PBOC also wants to promote interconnectivity in global financial infrastructure and the new trial aims to find solutions to issues that arise in cross-border settlements.

The new trial attempts to address problems that occur in cross-border settlements and furthers the central bank’s goal of fostering interconnectedness in the global financial infrastructure.

According to orders placed via the SWIFT messaging platform, international payments currently go through “correspondent banks.”

A few days to roughly a week can pass during the process. Dollars are also commonly used for cross-border payments.

Low-cost transfers made possible by CBDCs (central bank digital currencies) may encourage non-dollar trade and lessen China’s reliance on the US dollar.

In April 2024, seven central banks from the United States, Europe, Japan, and other countries announced a collaborative trial with private sector partners for CBDC payments.

As the digital yuan is having issues at home, a new trial is being conducted.

According to the PBOC, digital yuan transactions reached 7 trillion yuan (USD 992 billion) at the end of June 2024.

China has also experimented with using the digital yuan for salary and tax payments. However, compared to well-known private-sector payment apps like WeChat Pay and Alipay, Chinese users don’t see many advantages with the digital yuan.

It is estimated that over 80% of payment transactions in China take place without the use of cash.

A total of 7 trillion yuan (USD 982 billion) in transactions had been carried out using China’s digital yuan as of the end of June, Lu Lei, a deputy governor of the country’s central bank, told the media in September 2024.

The mentioned figure is now nearly four times the 1.8 trillion yuan recorded by the end of June 2023, according to data from the People’s Bank of China (PBOC).

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