Recent news claims that China has connected its digital RMB cross-border payment system to ten ASEAN countries and six Middle Eastern regions. However, this information lacks a reliable source and may be exaggerated. While China is part of mBridge, a joint effort for cross-border payments using digital currencies, the actual involvement of ASEAN and Middle Eastern nations is limited. Currently, only a few countries are officially part of mBridge, with more acting as observers. Additionally, for mBridge to significantly impact global trade, many obstacles remain, including the need for widespread adoption of local currencies for cross-border transactions. Therefore, the claim about expanded connections appears to be false.
China reportedly announced a link between its digital RMB cross-border payment system and ten nations within the ASEAN region, along with six countries in the Middle East. Despite this news making headlines, we couldn’t find a reliable source to confirm it, suggesting it might be exaggerated or false. However, the essence of the report isn’t entirely far off from reality, although it may be premature by a couple of years.
China is actively involved in mBridge, a collaborative project aimed at enhancing cross-border payments using central bank digital currencies (CBDC). While the digital RMB is utilized for transactions from the Chinese side, mBridge itself is a joint venture with participation from countries like Hong Kong, Thailand, the UAE, and Saudi Arabia. As of now, mBridge has several observers, which could include five ASEAN countries and six Middle Eastern jurisdictions if counted broadly.
Why mBridge Doesn’t Pose an Immediate Threat
One of the first reports discussing the ASEAN and Middle Eastern connections came from a Nigerian website, noting that up to 38% of global trade could potentially bypass the US dollar-dominated SWIFT network. However, achieving this percentage would require complete integration of all central and commercial banks in participating countries with mBridge, which currently seems far from happening. The slow uptake by Chinese banks suggests this figure is highly theoretical at this stage.
For the 38% scenario to materialize, countries would need to transition all their cross-border transactions to local currencies. However, most international trade still relies heavily on the US dollar because it offers the most stable and well-traded exchange rates. This preference means that while local currencies might sound appealing to governments, businesses often opt for dollars to avoid higher costs linked to suboptimal exchange rates in their own or their customers’ currencies.
No Verification of the Announcement
We prioritize getting our news from trustworthy sources. Daily monitoring of Chinese language publications reveals that we did not come across any solid evidence to support the ASEAN/Middle East claims. Although two prior Chinese articles referred to this report, they were from smaller outlets, and one of them is now unavailable. A major story on this topic by a well-known Chinese news agency was recently removed, further complicating the validity of the announcement.
One explanation could be that the news was factual but withdrawn due to sensitivities surrounding US tariffs. Alternatively, it may be entirely false, leading to a directive for its removal.
Understanding mBridge and Its Future
In 2023, we reported on mBridge and its potential to disrupt cross-border payments. The solution was launched as a minimum viable product in June 2024. Following some controversies regarding participation from sanctioned countries, it is clear that while mBridge aims to be a positive force for global trade, the path forward is complex.
As of the last update, Thailand was the only ASEAN member of mBridge, alongside two Middle Eastern members, the UAE and Saudi Arabia. Meanwhile, there were four additional observers from the Middle East—Bahrain, Egypt, Jordan, and Turkey, but not Iran or Qatar. Membership in mBridge requires banks to complete specific integrations, making a jump from one ASEAN member to ten in just a few months highly unlikely.
Ultimately, the idea that mBridge has extensively expanded from a handful of active participants to a broad network of ten ASEAN and six Middle Eastern countries appears overly optimistic. As it stands, the original report is likely more hype than reality.
Tags: Digital RMB, mBridge, Cross-Border Payments, ASEAN, Middle East, CBDC
What is the news about China’s CBDC payments?
China is reportedly linking its digital currency, known as CBDC (Central Bank Digital Currency), to payments with ten ASEAN countries and six Middle Eastern nations. This move is seen as part of China’s strategy to enhance its economic influence in these regions.
Why is China’s CBDC important?
China’s CBDC holds importance as it represents a new form of money that the government can control. It can streamline transactions, reduce costs, and potentially enhance security in digital payments.
How does this affect ASEAN and Middle Eastern countries?
By connecting with China’s CBDC, ASEAN and Middle Eastern countries may have easier trade and investment opportunities. It could also lead to closer economic ties and greater collaboration between these nations and China.
Are there any concerns related to China’s CBDC payments?
Yes, some experts worry about privacy and surveillance issues. There are concerns that using a digital currency controlled by a government might allow for tracking of transactions, which could impact people’s financial privacy.
What should people do to stay informed about CBDCs and fake news?
People should verify information from reliable news sources and stay informed about developments in digital currencies. Being cautious about the sources of information helps in avoiding misinformation or fake news.