The G20 Xi-Biden Meetup and The Future of The Digital Yuan

The Digital Yuan (E-CNY) could one day help overcome unfair sanctions, as we discussed before. Given that China is the world’s largest trading partner, and the ability of the E-CNY to forgo intermediary services such as SWIFT during cross-border transactions could be the tool that unleashes global trade to its full potential.

Currently, when international tensions have heightened to unprecedented levels, another event that may determine the future of international trade is happening.

The slogan for the 2022 G20 Summit taking place in Bali, Indonesia, is “Recover Together, Recover Stronger”, themed around overcoming economic crises resulted from Covid-19 lockdowns and western sanctions on Russia. With a global recession looming in the horizon, the world watches the developments of the summit.

Indonesian President Jokowi Widodo emphasized that the summit was not meant to be political, rather it is a stage to focus on economics and development. This is the 17th G20 Summit since the first one in 2008. The G20 Summit of 2022 will be a departure from the usual gathering with Russian President Vladimir Putin not attending. Instead, current Russian Foreign Minister Sergey Lavrov will be attending as Russian representation. 

Taiwan and the One China principle

The 2022 G20 Summit is of particular importance as it will mark the first ever in-person meeting between Chinese President Xi Jinping and US President Joe Biden. Violations from the US side of the foundations of US-China diplomatic relations in the Taiwan Strait had some anxiously speculating the unrest developing into full blown military conflict.

On the 02nd of August 2022, US House of Representatives Speaker Nancy Pelosi made a controversial visit to Taiwan. This was a direct violation of the three joint communiques and the One-China Principle upon which US-China diplomatic relations are founded on. It was also an indirect acknowledgement of Taiwan as a sovereign state by the US side.

Taiwan is an inalienable part of China, and the One-China Principle is one of China’s core interests. It is inevitable that the Taiwan question will be among the main topics discussed between President Xi Jinping and Joe Biden when they meet during the summit.

The meeting requested by the US head of state, despite seeming to be a constructive move to bridge fractured relations between the two countries, does not seem promising.

The US National Security Council Advisor Jake Sullivan has said that “Taiwan authorities” will be briefed on the Xi-Biden meeting to make them “secure and comfortable”. This is, once again, a step over the line from America.

China’s ambitions to build respectful and mutually beneficial relations with the United States is sincere. However, the United States has shown consistent opposition to cooperation with China. On the 07th of October the United States banned the purchase of advanced chips and chip manufacturing devices without a license by Chinese companies. This move, although intended towards reducing US chip manufacturers dependence on China, may do more to cripple the US chip industry. 

The future of Digital Yuan

With such moves by the US, questions arise about their acceptance of the Digital Yuan as a positive force in international trade. Will there be sanctions placed on the E-CNY once global transactions are made possible?

Although we do not yet know complete details of the meeting between President Xi and Joe Biden, there have been positive sentiments made by both sides in avoiding an unnecessary cold war. 

Coming back to the question of the future of the Digital Yuan, we have to turn our attention to the  United States’ Office of Foreign Assets Control (OFAC).

The OFAC was created in 1950 when China entered the Korean War. Currently, the OFAC administers sanctions on North Korea, Iran, Cuba, Syria, and Russia.

The purpose of the Office of Foreign Assets Control is to “disrupt activity detrimental to the US and its allies” and “force an end to them” by manipulating US assets held by the sanctioned party and limit their access to business opportunities with the US and its allies.

The OFAC has made their concerns regarding emerging digital currencies clear as well. There is clear will to use sanctions as a means to maintain US political interests worldwide. The OFAC states that they will “use sanctions in the fight against criminal and other malicious actors abusing digital currencies and emerging payment systems”.

The position of the Office of Foreign Assets Control raises the concern whether the emergence of the Digital Yuan will be allowed its full potential in international trade.

While the Xi-Biden meetup maybe just a baby step in the right direction, the future of the relations between the two countries and transaction innovations such as the Digital Yuan are not completely clear.