Turning point

On the other hand, the gravitational pull of the US dollar is palpable under the sheer influence of global economics and trade relations as the greenback, pegged to the currencies of more than 65 economies, is the most traded currency worldwide. However, its recent relentless strengthening, along with the US barring financial transactions with Russia's central bank, has sent monetary ripples across the globe.

To hedge the risks of geographic tensions and economic recession, more countries are thinking of diversifying their foreign currency reserves, offering tremendous opportunities for renminbi internationalization, that is, the digital yuan's cross-border transactions.

In a recent research paper posted on the website of the Carnegie Endowment of International Peace - a nonprofit international affairs think tank - Robert Greene, a US scholar focusing on Chinese financial-sector trends, noted that many Southeast Asian countries, including Singapore, Malaysia, Indonesia and Thailand, are stepping up efforts to reduce usage of the US dollar.

The PBOC signed a memorandum of understanding with Laos' central bank in September to set up renminbi clearing arrangements to promote investment and cross-border trade using the Chinese currency.

Harvey Chan, business development director at Hong Kong-based e-payment solutions provider Payment Asia, said he believes the inherited advantages of e-CNY endowed with financial technology, which allows faster and more efficient cross-border settlements, as well as lower exchange-rate costs, can inject new blood into renminbi internationalization.

In his view, economic prowess influences the decision of China's trading partners to use the digital yuan, with enormous cost savings for foreign enterprises in doing business with the country. For instance, using electronic currency in trade between Singapore and China could lead to estimated savings of between S$16 billion ($11.4 billion) and S$24 billion, global consultancy firm Oliver Wyman said. This represents 3 to 5 percent of the Lion City's GDP "due to fee savings from lower transaction costs and liquidity savings to the real-time treasury, and incremental volumes from lower fees or more liquidity".

As the world's largest exporter and a manufacturing powerhouse, China trade surplus continued to widen to $85.15 billion in October despite market uncertainties, compared with $79.39 billion in August, according to China Customs data.

Hong Kong was the mainland's second-largest export market, taking up 10.4 percent, or $351.1 billion, of mainland's total exports last year.

Given the favorable external and internal conditions, Hong Kong is likely to become a vibrant center for using the digital yuan in international trade, with its competitive advantages as the world's largest offshore renminbi center and the principle of "one country, two systems" - the cornerstone of the city's capital system.

Hong Kong enjoys free trade and capitalism different from that of the mainland. On the opening day of 2022 Hong Kong Fintech Week, which was held from Oct 31 to Nov 4, the city announced a new regulation for easing restrictions on digital assets, in stark contrast to the mainland's approach to cryptocurrencies.

Current renminbi deposits in Hong Kong exceed 800 billion yuan. According to the Society for Worldwide Interbank Financial Telecommunications, more than 70 percent of global offshore renminbi payments are processed in Hong Kong. The PBOC upgraded a currency swap facility with the SAR in July to a permanent agreement.