March 24, 2025
By Anjali Kochhar
China is considering its response to the growing dominance of US dollar stablecoins in global finance, with a top economist proposing new strategies to strengthen the role of the digital yuan. Zhang Ming, Deputy Director of the National Finance and Development Laboratory, outlined his ideas in a widely circulated article titled Digital Currency Reconstructs the International Financial System.
According to Zhang, US dollar stablecoins are already deeply integrated into cryptocurrency trading and decentralized finance (DeFi), serving as a primary medium for crypto-linked loans and a store of value in countries with weaker currencies. He warned that their increasing role in digital transactions could further entrench US dollar dominance in global finance.
To counter this, Zhang proposed a three-part strategy.
Expanding the Scope of the Digital Yuan
China’s central bank digital currency (CBDC), the digital yuan, primarily focuses on retail transactions, similar to cash payments (M0). However, Zhang argues that its application should extend to broader financial use cases, including business and institutional transactions (M1 and M2). Expanding its role in cross-border trade, corporate settlements, and financial markets would enhance its global presence.
While China has already piloted some B2B transactions using the digital yuan, Zhang’s proposal suggests a more aggressive push into these areas. He did not reference China’s ongoing involvement in mBridge, a multi-country CBDC project aimed at facilitating cross-border payments, which could also serve as a key initiative in this expansion.
Exploring Chinese Stablecoins
Zhang also suggested that China should experiment with stablecoins, seeing it as an opportunity to counter US dollar stablecoin influence. While China has largely avoided stablecoins domestically, Hong Kong has become a testing ground. The city has approved several cryptocurrency exchanges and recently introduced a stablecoin sandbox, with financial giants like Standard Chartered forming joint ventures to explore stablecoin applications.
A wider rollout of Chinese stablecoins could be integrated with digital payment giants like Ant Group’s Alipay, which already operates across Asia and beyond. Using blockchain-based tokens on such platforms could strengthen the yuan’s presence in digital payments and provide an alternative to dollar-backed stablecoins.
Zhang’s proposals reflect growing concerns in China about the financial influence of US dollar-pegged digital assets. Whether Beijing formally adopts such measures remains to be seen, but the debate highlights the strategic importance of digital currencies in the evolving global financial system.
About the author
Anjali Kochhar covers cryptocurrency and blockchain stories in India as well as globally. Having been in the field of media and journalism for over four years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
