Central Bank-Issued Digital Currency: Digital Yuan and the Party-State’s Control over the Financial Sector

The People’s Bank of China (PBOC) has announced the intention to launch the digital yuan, officially called the Digital Currency Electronic Payment (DCEP), for the public use. The inception of the DCEP raises some important questions. How would the DCEP impact China’s existing economic model? How would it affect the party-state’s role in the Chinese banking industry? What sorts of change would the digital yuan bring to the political economy of China, especially regarding the public-private relative distribution of economic power? This multidisciplinary study therefore combines the theoretical explanations as a result of digital currency with the contexts of the political economy that prevails in the China. This is done using qualitative method by collecting data and evidence from the existing policies the partial rollout of the DCEP. This paper argues that the evidence thus far of the DCEP seems to conform with the explanation put forward by the financial repression theory. This is most notable in the fact that the structure of the digital currency enhances the ability of the party-state to monitor, control and supervise the flow of digital yuan and forestalls the risks of influential players outside the party-state’s control emerging within the economically strategic financial sector. Nonetheless, the DCEP is different from most other financially repressive policies in some important aspects including competition promotion between different players and utilisation of DCEP-related data as tool to improve effectiveness of macroeconomic policies.