China’s Central Bank Launches Digital Yuan Pilot for Belt and Road Trade Settlements

China has taken a major step toward expanding the role of its central bank digital currency in international trade. On September 2, 2025, the People’s Bank of China (PBoC) announced the launch of a digital yuan pilot program for cross-border trade settlements under the Belt and Road Initiative. The pilot will begin with seven partner countries, including Pakistan, Thailand, Indonesia, and the United Arab Emirates, where selected banks and companies will use the e-CNY to settle import and export contracts.

The PBoC said the initiative aims to reduce transaction fees, cut currency conversion costs, and eliminate delays that are common in traditional banking systems such as SWIFT. By removing many of the frictions in global trade finance, Chinese officials believe the system will especially benefit small and medium enterprises, which often face the highest costs and longest settlement times. Yi Gang, former governor of the central bank and now an advisor to the project, said the e-CNY would provide a faster, cheaper, and more secure alternative for international payments, calling it a financial infrastructure suited for the digital economy.

Observers see this move as part of Beijing’s broader strategy to internationalize the yuan and gradually reduce the global reliance on the U.S. dollar. The dollar still dominates cross-border trade, accounting for about 85 percent of settlements worldwide, but China’s position as the largest trading partner for dozens of countries gives its CBDC a foothold in challenging that balance. Western officials have already voiced concerns, warning that widespread use of the e-CNY could help countries bypass sanctions and reduce global financial oversight. The U.S. Treasury Department recently stated that central bank digital currencies could pose challenges to transparency if they are not aligned with international standards.

The technical backbone of the pilot will rely on the mBridge platform, a blockchain-based multi-CBDC system developed jointly by the PBoC, the Hong Kong Monetary Authority, the Bank of Thailand, and the Bank for International Settlements Innovation Hub. mBridge has already processed billions of dollars in test transactions and is now being scaled up for commercial settlement. Chinese banks including Bank of China and ICBC will act as settlement channels, while in Pakistan, Habib Bank has been selected as one of the first foreign institutions to participate in digital yuan trade.

If the experiment succeeds, China plans to expand the program to more Belt and Road countries in Africa, Central Asia, and Eastern Europe. The PBoC is also exploring ways to add programmable features to contracts, allowing for automatic payments once shipments are delivered or agreed terms are met. While adoption will depend on how willing countries are to move away from dollar-based contracts and whether businesses find the system easy to use, the launch marks a significant milestone in China’s push to position the digital yuan as a practical tool for global commerce.