- AXIOS - Feb 5, 2021 -
China appears to have taken another major step in its quest to move the world away from the dollar and position itself as a major power in the world's financial markets.
What happened: China's central bank has set up a partnership with SWIFT, the global system for cross-border payments, through its digital currency research institute and clearing center.
Why it matters: The move has sparked "speculation over the central bank's pursuit of promoting the global use of its digital currency," China's state-operated Global Times wrote on Thursday.
The big picture: China is far ahead of the U.S. in the development of a central bank-backed digital currency and as such could be far ahead in the future of global payments and financial settlement.
If China can cement the yuan as the world's favored digital currency, it could displace the dollar and provide China with the immense global privileges that have been enjoyed by the U.S. since the end of World War II.
Be smart: The lack of financial transactions in and broad use of its currency is the greatest detriment to China amassing global power.
The country has been opening up its financial markets and now has mainland stocks listed on top international exchanges like MSCI and its government bonds have been added to the global benchmark Bloomberg and JPMorgan bond indexes.
In 2020, China drew double the amount of foreign capital to its yuan-denominated government bonds as the year before.