Evolution of Digital Currency and Its Economic and Financial Implications in China

This paper conducts a comprehensive examination of the multifaceted impact of digital currencies within the context of China, encompassing economic, financial, and business dimensions. It provides an in-depth exploration of the evolutionary path of China’s digital currencies through literature review, with a special focus on the development of central bank digital currencies (CBDC). From an economic standpoint, the analysis uncovers several noteworthy aspects, including the potential for cost savings, an expansion of the monetary base, and enhanced ease of financing. On the financial front, digital currencies exhibit the capacity to reduce operational expenses and mitigate fraud risks. However, they simultaneously intensify competition among commercial banks, impacting their profitability and operational autonomy. Moreover, the study scrutinizes the adoption of digital currencies within advanced regions, spotlighting noteworthy innovations in Hangzhou, such as the digital RMB payment ecosystem and the use of digital codes for metro rides. Conclusively, the paper advocates for reinforced international collaboration to bolster credit services and adapt to the ever-evolving technological and regulatory landscape.