Digital Yuan Allows China To Track Payments To US Companies

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China’s paper cash is going digital with the launch of the E-Yuan. When the world will see China’s renewed strength at next year’s Winter Olympics in Beijing, the communist government in Beijing wants to make the Digital Yuan (or E-Yuan) a showpiece of Chinese strides in e-commerce.

Problem for the US companies doing business in China is that the Chinese authorities will have more data on their customers than the business in Silicon Valley might have.

Growing distrust

The meeting of Anthony Blinken, the newest US Secretary of State, with his Chinese counterpart last week showed that any hope which European diplomats might have that China and the US would drift closer together with Joe Biden in the White House, is very idle indeed.

China is gearing up to take over as the world’s dominant superpower and the introduction of the E-Yuan is one more chess piece on the board.

As the Wall Street Journal remarked last week, the introduction by China of it’s own CBDC (Central Bank Digital Currency) in what will inevitably become the largest economic marketplace in the world, allows it to track all payments of it’s citizens.

Whereas Europeans would because of GDPR and Americans because of Constitutional Amendments have a serious problem with their respective Central Banks knowing all it’s spending to the detail, the Chinese have no such issue giving up data.

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In fact, recent studies have shown that e-commerce is far more developed in China already because of the fact that Chinese companies know their customers better and have been gathering transaction data in detail for years (mostly with the blessing of the Chinese government).

China’s economic planners

Last year, the Center for a New American Security (CNAS) authored a report entitled: China’s Digital Currency: Adding Financial Data to Digital Authoritarianism.

In the lengthy overview, they explained that the US fears that the range of transactions that can be harvested by tracking the E-Yuan:

Will arm China’s economic planners with a range of data that no other government has ever been able to efficiently assemble.

Interesting detail is that China’s central bank has even put an expiration date in its digital currency, which means that if in the future a Chinese customer buys and iPhone in Shanghai from Apple and pays it with E-Yuan, the Chinese central bank can decide at any time what the value of that currency on Apple’s books is.

A nightmare scenario for many Silicon Valley companies given the size of the Chinese market.