The Digitalization of Cross-Border Payment Systems and the Introduction of the CBDC

China is the world's second-largest economy by GDP and the largest exporter, but its currency is not yet of global significance. By promoting the RMB as a global currency for trade, investment, and foreign exchange reserves, China aims to reap some of these benefits while increasing its economic policy autonomy. There are two main goals of the RMB internationalization. The first one is to enhance the status of the Chinese currency and strengthen its role against other currencies, especially against the USD. The second goal is to support the economic developments and to strengthen the role of China in the international economy. Due to the economic Sino-US decoupling, there is currently a much greater need for China to have its own strong international currency that supports the role of its economy and the strategies for further economic development. Some economists such as H. Chey, however, assess that it is almost impossible that the RMB will achieve a status similar to that of the USD in the near future. According to them, China has not developed deep, open, and liquid domestic capital markets, so the RMB is not widely used as a medium of exchange, unit of account and store of value at both official and private levels. Another characteristic of internationally operating currencies is the open and liberalized domestic economy, which is of limited relevance to China, which still has relatively closed capital flows. Apart from the traditional developments of currency internationalization, there is a growing role of the internationalization via digitalization. Digitalization of the RMB is a new Chinese initiative whose pace has increased in recent years. The main goal of the idea is to replace some of the cash in circulation by central bank digital currency (CBDC or e-RMB). The PBC is one of the first central banks across the world which pays attention to the idea of the CBDC. The country also became the first major economy which decided to create an official CBDC. It is expected that at the first stage of development, the e-RMB will be a domestic currency and the international use is not the current priority. However, it is planned that in the future the e-RMB will be used to navigate international transactions around payment systems and networks. The possibility to employ the CBDC in international transactions has important consequences for the process of RMB internationalization.