Digital Yuan Gives China a New Tool to Strike Back at Critics
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Digital Yuan Gives China a New Tool to Strike Back at Critics
(Bloomberg) —
Even as China grows in economic and military power, perhaps nothing reveals Beijing’s weaknesses more than the U.S.’s control of the global financial system.China has recently sought ways to counteract U.S. sanctions after the Trump administration targeted Chinese officials and companies over policies from the South China Sea to Xinjiang. Hong Kong’s leader can’t access a bank account and a top executive at Huawei Technologies Co. is detained in Canada. Even China’s state-run banks are complying with U.S. sanctions.That’s one reason the Biden administration is starting to study whether China’s development of a digital currency will make it harder for the U.S. to enforce sanctions, Bloomberg reported earlier this month. The digital yuan, which could see a wider roll out at the 2022 Winter Olympics in Beijing, is also spurring the U.S. to consider creating a digital dollar.
But instead of challenging U.S. dollar dominance and neutralizing sanctions, the digital yuan appears potentially more geopolitically significant as leverage over multinational companies and governments that want access to China’s 1.4 billion consumers. Since China has the ability to monitor transactions involving the digital currency, it may be easier to retaliate against anyone who rebuffs Beijing on sensitive issues like Taiwan, Xinjiang and Hong Kong.
“If you think that the United States has a lot of power through our Treasury sanctions authorities, you ain’t seen nothing yet,” Matt Pottinger, former U.S. deputy national security adviser in the Trump administration, said last week at a hearing of the government-backed U.S.-China Economic and Security Review Commission. “That currency can be turned off like a light switch.”
So far China has mostly resisted hitting foreign firms in response to U.S. actions on companies like Huawei, holding off on releasing an “unreliable entity list” designed to punish anyone who damages national security. Any move to cut off access to the digital yuan would carry similarly high stakes, potentially prompting foreign investors to pack up and leave.
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Investors will be scrutinizing the Federal Reserve's comments at the close of its policy meeting this week, which will come on Wednesday, for insight into the central bank's thinking on inflation, bond purchases and risks to the financial system posed by soaring asset prices. WHERE IS INFLATION HEADED? The Federal Reserve has said it expects some inflationary pressures, but predicts it will be temporary and not enough to warrant interest rate hikes.
14h ago
FX EmpireAsia – Pacific Shares Weaken Ahead of US Tech Earnings; BOJ Lowers Inflation Expectations
Japan’s central bank maintained its massive stimulus on Tuesday and projected inflation missing its 2% target for years to come.
19h ago
ReutersU.S. judge says Huawei has not violated court order, but warns company lawyers
(Reuters) -A U.S. judge on Monday found that Huawei did not violate a court order by sharing certain information with its chief financial officer, who is using it to help fight her extradition from Canada. But U.S. District Judge Ann Donnelly in Brooklyn, warned Huawei lawyers: "be careful with your filings." Lawyers for Huawei Technologies were summoned to the court in New York after U.S. prosecutors accused Huawei of improperly sharing materials the government disclosed in the criminal case against the company with chief financial officer Meng Wanzhou, who also is charged but considered a fugitive.
1d ago
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