China’s central bank accelerates digital yuan international trials

China’s push to internationalize its central bank digital currency is entering a new phase, with the People’s Bank of China announcing fresh cross-border trials for the digital yuan, or e-CNY, in collaboration with overseas financial institutions. The central bank confirmed that it is setting up an international operations center in Shanghai to coordinate these efforts and manage settlement infrastructure, signaling its intention to position the e-CNY as a viable alternative to traditional dollar-based systems in certain trade corridors.

The trials will focus heavily on transactions with Southeast Asian partners, where China’s trade relationships are deep and growing. Several commercial banks in countries such as Thailand, Malaysia, and Singapore are already testing the e-CNY for payments tied to goods and services imports, particularly in industries like electronics, agriculture, and manufacturing. The expansion builds on earlier domestic pilots in more than two dozen Chinese cities and cross-border projects with Hong Kong and the United Arab Emirates under the Bank for International Settlements’ mBridge initiative.

One key component of this strategy is integration with China’s Cross-Border Interbank Payment System, or CIPS, which has been gradually expanding its network to include more foreign banks. CIPS offers an alternative to the SWIFT messaging system and is designed to settle payments directly in yuan. By linking the e-CNY with CIPS, the PBOC aims to streamline settlement times, reduce costs, and lower the reliance on intermediary currencies like the US dollar. Foreign banks, including Standard Bank in South Africa and First Abu Dhabi Bank in the UAE, have recently joined the network, underscoring its growing reach.

Chinese officials are framing the initiative as a way to modernize payments infrastructure rather than as an overt challenge to the dollar. Still, analysts note that the geopolitical implications are significant. Wider adoption of the e-CNY in trade settlements could gradually increase the yuan’s role in global finance, particularly among emerging markets looking for alternatives to dollar-based payment rails amid sanctions risks and currency volatility.

The technology underpinning the e-CNY is designed to allow both online and offline transactions, giving it potential advantages in regions with unreliable internet access. Its programmable features also enable targeted disbursements and conditional payments, capabilities that could be appealing for aid distribution, trade finance, and cross-border payroll. However, adoption will require addressing concerns about data privacy, currency stability, and the readiness of foreign institutions to integrate the digital yuan into existing systems.

For now, the PBOC’s approach is measured, emphasizing partnerships and technical interoperability rather than a sudden rollout. If the trials prove successful, officials say the next stage will involve expanding e-CNY availability through mobile wallet providers and direct integrations with foreign payment platforms. For China, the long-term vision appears to be not just a domestic digital currency, but a cross-border payment system that aligns with its trade ambitions and enhances the yuan’s standing on the global stage.