4 reasons why Beijing is pushing digital renminbi and the problems e-CNY may create
What this covers
Beijing has been planning to implement digital Renminbi or e-CNY for years. After two years of pilot programs, some local governments have adopted digital RMB as the official payment method. What does the CCP want to achieve from e-CNY or digital yuan? And what problems do we see in the new currency? 1. What’s digital Renminbi or e-CNY? 2. Beijing’s 4 agendas 3. Potential problems with e-CNY Sign up for my emails: https://leisrealtalk.com/ Donation: https://donorbox.org/support-lei-s-real-talk-support-lei Ideas/Suggestions: Leisrealtalk@gmail.com #Leisrealtalk #chinaeconomy #digitalrenminbi #digitalyuan #chineseeconomy
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China's digital currency (e-CNY) represents a comprehensive state control mechanism disguised as monetary modernization, enabling the CCP to eliminate hidden cash, establish a planned economy, conduct mass surveillance, and manage populations during crises, but faces significant technical vulnerabilities and resistance from officials and wealthy citizens who benefit from the current opaque system.
- Digital currency allows Beijing to track and confiscate hidden wealth while maintaining plausible deniability through coercion rather than law
- Unlike paper money, e-CNY enables transaction restrictions, spending caps, and wallet classifications that empower government control over individual financial access
- Unresolved technical problems—counterfeiting, offline transaction fraud, and double-spending—suggest rushed rollout prioritizing control over functionality
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At the 2015 Chinese People's Political Consultative Conference, the Jose Society (a CCP-affiliated NGO) formally proposed issuing a new currency to replace the renminbi to eliminate the problem of hidden cash, indicating this was a widely recognized issue at the highest policy levels.
“so the problem of hiding embezzled or bribed cash is so widespread that in 2015 at the 12th ccpcc ccpcc yeah Chinese people's political consultative conference a CCP Affiliated NGO by the name of Jose Jose Society proposed to issue a new currency to replace the rumini to effectively eliminate the problem of hidden cash so it is a widely recognized problem and there was someone who actually officially proposed that”
Counterfeiting has already appeared in e-CNY during pilot phases, with fake digital e-CNY wallets being discovered in the market in October 2020, as acknowledged by Moo Yang, head of China's Digital Currency Research Institute.
“this one was in from 2020 during the pilot phase this one says this was in October 2020 the head of China's digital currency Research Institute which is an organization under the central bank uh the head of the digital currency the currency Institute his name is I have his name here is what uh right is that his name did I spell his name right yeah Mr Moo um this quote is from me he said we have found counterfeit digital remedial wallets in the market”
Counterfeiting digital currency threatens to disrupt the market and crush public confidence in the currency, and is not a small issue because it undermines the foundation of a currency system
“the counterfeiting problem is I think is going to be a serious problem um I don't know how the CCP is going to um address that because it's gonna Crush people's confidence in the currency when you have this it's going to disrupt the market this is not like a small issue”
Old people in China have stopped spending and working because they must save money for healthcare expenses, reducing economic activity
“old people basically stop spending uh because they don't have money they need to save to to take to uh to spend on Health Care and young people young people can't find a job”
The first agenda for digital currency is to eliminate hidden cash held by corrupt officials and others, since this cash is not in circulation and represents wasted money supply
“the first one the first one is to eliminate hidden cash now we know China has printed a lot of money and it's M2 money supply is what 266 trillion um which is more than the total M2 M2 supplies of the United States Japan Germany and South Korea combined if you do the math it's more but a significant amount of the money are not in circulation uh stashes and stashes of cash are hidden in people's houses basement or somewhere in there in the venues that they control”
With digital currency, the central bank has complete control and visibility of all financial transactions, whereas with paper money the government cannot know who spends money or with whom they spend, ending financial privacy entirely
“with paper money the government doesn't know how you spend your money and who you spend with but with the digital remain B everything becomes transparent and so it's the end of privacy the CCP is able to monitor all transactions um and that's a concern today technically with alipay and WeChat pay being so popular in China so Beijing can monitor technically it can monitor every Chinese Financial activities um but it needs to have access to this master data right inclusive all Financial transactions um and it involves other players like you need to access um um Ali Ali pays data you need to access wechat-based data but with digital domain B it becomes much easier because the Central Bank controls everything”
Former Huarui Group chairman Xiaoming was found with 270 million yuan in cash at his home weighing three tons and occupying three cubic meters of volume, which was described as 'only a fraction' of embezzled funds and broke the previous record held by Wei Pangham.
“when the chairman of hwarun group like xiaoming was arrested for corruption um authorities found 270 270 million unminb at his home and the amount of cash weighed three tons and was three cubic meters in volume”
E-CNY uses wallet classification with transactions under 2,000 yuan claimed to be anonymous but requiring ID and bank account verification for larger amounts, creating a system of unequal financial rights where wealthier citizens require pre-approval to access higher spending privileges.
“all transactions under 2000 remain B are supposedly Anonymous so it is they claim it's it's secure because they're Anonymous they don't know who uses them but transactions over 2000 requires you to provide your ID and bank account um when you when you make a purchase”
The demographic problem in China is not about too many elderly people but rather too few young people, resulting in an inverted pyramid where the aging labor force cannot support the economy and manufacturing cannot find enough workers.
“the problem is not they have too many elderly people you're right they are not going to take care of the elderly people but the problem right now is they have too few young people the the the labor force is quickly aging they're running out of young labor to work in the factories to work in the manufacturing facilities to work in construction to work even work in a country-sized um so they just don't have enough uh young people”
Young Chinese college graduates face severe unemployment and career barriers, as employers view them as overqualified for blue-collar work, causing graduates to pursue advanced degrees rather than available blue-collar jobs, creating a mismatch between labor supply and economic needs.
“they have a huge um have a very high unemployment problem with the college grads and these young people are crying in social media videos saying that I wish I didn't go to college I wish I didn't go to graduate school because now I can't go back to do those you know manufact blue-collar jobs they feel it's an insult to their education it's an insult to their parents investment in them”
The government's attempt to control how many children people have combined with controlling population through a planned economy creates massive unemployment for young people, as the government cannot reconcile controlling population numbers with creating sufficient jobs.
“this happens in a planned economy when the government wants to control everything this happens when the government wants to control everything wants to make decisions for all individuals this is this what this is what happens when you have a big government it wants to control population how many children you could have and that's and it's paying the price”
The sudden loss of wealth and social status among former upper-middle class Chinese is more traumatic and socially destabilizing than poverty among those who have always been poor, as it creates expectations violation and identity shock.
“I think this sudden loss of wealth is more traumatic right because if you have always lived poor and then maybe it's it's not so traumatic but you were okay you were considered upper middle class or you you had a good life you know by Chinese stand and all of a sudden you're at the bottom um you have to struggle that's traumatic and that's the cause for social instability”
Beijing designed digital currency as an important tool in its plan for renminbi globalization, believing it is a way to get ahead of the United States and break dollar hegemony, but this is phase two of the plan and not yet the focus of domestic rollout
“when CCP designed it it is the digital domain B is to play an important role in its plan for remember globalization uh Beijing seriously believes that the digital currency is a way for the regime to get ahead of the United States and to break the the dollar hegemony but the digital remain peace role in the global market is is a big topic and I think it's phase two in its original plan it's not ready for that yet so I won't be focusing on that tonight”
As long as paper money exists, a significant portion of the population will resist digital currency adoption
“so um but I think as long as paper money is still around uh people will resist or a significant portion of the people in society will resist digital remain B”
In offline mode transactions, the same digital money can be copied and sent to multiple people, creating a delayed settlement problem where banks may pay out the same money multiple times, causing financial losses
“there's another problem with the offline mode transaction you know with paper money you can only spend it once right because it's a note you you give it to someone and then they you cannot buy you cannot use it anymore but in a world of digital currency the same amount of money can be copied and paid to multiple people and if people do this in the offline mode it won't be caught because there's a delayed there's a delay in the offline mode that means banks will have to pay the money multiple times during you know due to this delay and therefore they may lose money um so it's another loophole Banks don't don't like this feature they don't like the transactions um in this offline mode”
Digital currency (e-CNY or DCEP) is not a virtual currency like Bitcoin but rather a state-issued digital version of the renminbi, issued by the People's Bank of China with identical value to paper renminbi, and does not require customers to have bank accounts
“what is digidorah mean B it's not a virtual currency such as Bitcoin it's known as its full name is digital currency electronic payment or dcep it's issued by China's Central Bank uh which is the People's Bank of China it has the same value as the remibi banknote or coins it doesn't require a customer to have a bank account to have this to to have the digital currency”
The CCP has deployed approximately 80,000 farm police to the countryside to monitor agricultural activities and force farmers to grow grains (rice, wheat) rather than more profitable crops, using administrative enforcement instead of economic incentives.
“I saw some reports that the CCP is starting um to micromanage the Chinese Farmers with 80k new Farm police yes it is it is true um it has been all over the news of social media it's it's true they have sent an army of farm police to the countryside to to monitor people's agriculture to monitor agriculture activities the the goal is to ensure that people grow um grains you know go rice wheat in a grain”
China's M2 money supply is approximately 266 trillion yuan, which exceeds the combined M2 supplies of the United States, Japan, Germany, and South Korea.
“China has printed a lot of money and it's M2 money supply is what 266 trillion um which is more than the total M2 M2 supplies of the United States Japan Germany and South Korea combined”
South Korea has recently taken a much stronger geopolitical position, departing from being the 'weakest link' in the Indo-Pacific by directly addressing Taiwan strait issues as matters of regional concern, causing friction with the Chinese government.
“I think South Korea has all of a sudden woke up South Korea has always been considered sort of a weakest link in the indo-pacific in the in the Pacific right um it has been because it relies on China for its um for its export it's you know the economy highly depends on China but recently the Korean uh president has has been so uh straightforward with with China um I think I think it made a a harmless comment it just said that it I think oh yeah I think the the Korean president has said that um the once you know the the Taiwan straight cry issue the Taiwan Street Taiwan issue is not just a China issue it is it is a of concern to the world's people uh he made that comment which is everybody's understanding”
A significant portion of China's money supply—estimated at least 40 trillion yuan, or 15% of M2—is held as hidden cash in homes and venues controlled by corrupt officials and wealthy individuals rather than in active circulation.
“some I've seen the estimate someone estimate the total amount of cash held by corrupt officials and their family is at 40 trillion RMB um or at least 40 trillion”
China has an affluent consumer base of approximately 100 million people out of 1 billion total, which is comparable to the US (300 million) and Europe (300+ million) in aggregate purchasing power, but this number is rapidly shrinking due to wealth losses.
“there's about a hundred million people 100 million Chinese uh that that are considered considered affluent they they have the money they they are um they are what the multinational companies are interesting they are what they call the Chinese market because 100 million is a large number right the U.S population is three hundred thousand it's 300 million uh in Europe is what a little more than 300 million so 100 million affluent consumers are a substantial amount of people”
China's pandemic mortality statistics (claiming only dozens or thousands of deaths) were obviously false, as evidenced by funeral homes having backlogs of bodies for cremation
“take a look at their pandemic numbers everyone you know people are seeing you know the people like dying right you have you have like um uh funeral homes being you know you know having a backlog of uh backlog of uh of bodies to be cremated you see how many people died and yet the the China CDC announced well we have what a dozens of death or thousands of death nobody believes that”
Major Chinese e-commerce and tech companies including JD.com, Tencent, Meituan, Huawei, and Bilibili have participated in digital renminbi pilot programs with the central bank
“an expo called the fourth digital China achievement Expo and China's uh big tax e-commerce giants like JD uh tencent and announce their participation with the Central Bank in the digital MBP project and may Tuan uh Huawei uh Billy Billy and other companies have already participated or already part of the um the system they already participate in the digital remain B pilot programs”
The CCP will never admit making mistakes in official capacity, choosing instead to maintain a facade of credibility through elaborate presentation of false data despite universal awareness of falsity.
“one thing with the CCP is they wouldn't they never ever admit any mistake uh people who have lived in China know this even though it's it's wrong dead wrong they would never admit any mistake”
The U.S.-China relationship is the focal point determining South Korea's geopolitical position and what happens between Washington and Beijing is critical to regional stability.
“everything boils down to Sun or us relations right that seems to be the focal point it it really matters I think it really matters what happens between us and China so what the Biden Administration does uh is is very important is critical”
The digital e-CNY system requires wallet classification not only for control purposes but also due to technical limitations: to prevent malicious users from repeatedly exchanging small amounts between accounts to generate junk transactions that could crash the system
“there's a technical vulnerability of the system that requires this kind of classification other than the control reason right I I gave you there's a technical requirement that that kind of requires this kind of classification of of the diff of the type of wallets you have because the digital MB system is afraid of um or would run into a problem if users maliciously exchange money repeatedly to crash the system so for example you if you have a user a and a user B just exchange let's say one un repeatedly between them go back and forth um that generates a lot of what we call junk transactions right trash trash transactions and if people do this on purpose and on a large scale it could crash the system”
E-CNY's offline transaction capability requires installation of microchips in cell phones to allow transactions between parties not connected to the internet, which is necessary to broaden adoption but creates technical vulnerabilities.
“one of its most important features is that its ability to conduct offline transactions meaning you can use your digital wallet to buy things when you are not connected to the internet and not only you are not connected to the internet the merchant is not on the internet either so it's allowing a transaction between two parties that are not on the internet um so it's called the offline mode capability of digital beam so this is an important feature to allow more people to be able to use it however this creates a problem because in order to do this it requires the installation of a microchip in the cell phones”
A deputy director of the municipal Railway Bureau in Inner Mongolia (My Tune) was found with 130 million yuan in cash hidden across two houses he owned.
“in December 2013 uh my tune former deputy director of the municipal Railway Bureau in the capital city of inner Mongolia was found to have uh hit 130 million yen into houses he owns”
Changshu city government announced that starting in May it will pay all civil servants exclusively in digital renminbi, making it one of the first widespread mandatory adoptions of digital currency for a large population
“recently this city government announced that starting in May it will pay its employees with digital remain B only so in other words all civil servants in the city will receive their salary in the form of digital MMB starting next month actually in a few in a few days now”
The second agenda behind e-CNY is to enable the CCP to establish a full-scale planned economy by controlling the distribution of resources, wealth allocation, and living necessities through centralized control over the money supply and transaction permissions.
“second agenda is it will allow the CCP or Beijing to kick-start a full-scale planned economy Beijing wants to have a better control of its economy given the way it's it's been going but how does it do it by controlling the money of course when a digital remedy is rolled out on a large scale and is in as and and is widely in circulation Beijing will effectively turn Chinese economy into a plan a planned version because the premise of a planned economy is that the government firmly controls uh the distribution of resources the distribution of wealth and also the allocation of um living Necessities”
During e-CNY pilots, the CCP has imposed expiration dates on distributed digital money and restricted spending categories, requiring individuals to spend money by a deadline and only on approved items like groceries but not restaurants, converting e-CNY from currency to government-endorsed commodity vouchers similar to 1960s-70s rationing systems.
“when a digital remedy is rolled out on a large scale... Beijing has issued digital money in some designated area um when the money when they when the money has expiration date and so basically they they give you they add money to your digital wallet but you have a deadline to to use that to use that money and it could also designate a usage certain usage for the money um you know for example you can only buy it you know by grocery but you cannot use it to to go to a restaurant”
The CCP appears to have rushed the rollout of e-CNY despite it not being fully ready, based on several unresolved technical problems and the mentality of 'greatly moving forward' without minding details, which suggests the system is a wartime mechanism being tested.
“the reason why people say this what people the reason why people say this is really kind of a wartime mechanism that Beijing is testing or rolling out is because it seems to have rushed to roll out the digital currency because it's not entirely ready because of several problems”
Counterfeiting of e-CNY is likely to be a severe and ongoing problem due to China's history of intellectual property theft, technological capabilities, widespread unemployment, poverty, and citizens' lack of income-generating opportunities, combined with the incentive structure that makes counterfeiting attractive.
“while the CCP has been involved in stealing Technologies and violating intellectual properties for decades the result is rampant counterfeiting uh problems now it's coming to hunt it's digital currency and it's difficult to print fake banknotes but with digital Technologies and the amount of technical Talent China has that's out there that are unemployed and the level of poverty and then and people's I mean everything we put everything together I think a lot of Chinese have the incentive to create fake to do something right to to to make fake money”
The local government debt problem in China is critical, and according to a Taiwanese expert's theory, if local governments are in the red for eight consecutive quarters (two years) without central government rescue, the regime has effectively disintegrated.
“there's a Taiwanese expert who believes that when the local government are not able to are are in a funny are in a in the red for two years for eight quarters consecutively then the CCP and the central government is not backing them out then the the the regime is effectively has dis integrated because it's it has lost power and so according to his Theory we're already in quarter number three so we're only five quarters away from that”
Digital currency cannot be traded for gold or foreign currencies, but can be used to purchase real estate or stocks, and is currently designed primarily for domestic use
“you cannot trade the digital money in go uh in gold or foreign currencies I mentioned but you can trade your your um uh your digital money to buy real estate you can buy real estate with with this money or buy stocks um at this stage it's mostly for domestic use”
ATM machines have been installed throughout China where users can deposit paper money and receive digital currency, and machines accept 17 different foreign currencies, but conversion in the reverse direction (digital to paper or foreign currency) is not possible
“there are ATMs set up throughout the country where people can put in paper money and then get uh I have a picture of them here we go uh you could put in paper money or even it takes like 17 different foreign currencies and then you get digital money but not the other way around you can you know redeem money from your digital wallet and then get paper get it claims you can get paper money but I really doubt it for sure you cannot get foreign currency out of the digit from you know from the digital money”
The third major problem with e-CNY is that wealthy people, officials, and those with significant hidden cash will resist adoption and attempt to find loopholes and create alternative subsystems to circumvent the system, undermining the original purpose of establishing government control.
“the third problem that I see in in the digital remember is the government officials and the wealthy people will resist uh the the CCN the e c n y the digital money think about it those officials who have been taking bribes uh now won't be able to do it because all transactions will be transparent because the central bank can see every every transaction right um and then wealthy people would have to invite the CCP invite their government to monitor all of their financial activities so I think there will be a lot of resistance um or people will try to find loopholes and they will create other subsystems to to go around it”
Banks are uncomfortable with e-CNY's offline transaction feature because of fraud risks, and if the CCP's claim that transactions under 2,000 yuan are truly anonymous is correct, then users cannot be identified or held accountable for offline fraudulent spending.
“Banks don't don't like this feature they don't like the transactions um in this offline mode and particularly when the CCP claims that transactions under 2000 Yen are Anonymous we don't know if it's truly Anonymous but let's say if it is truly Anonymous then then technically you don't know who spent them right”
Beijing may be forced to maintain dual currency systems (paper and digital), but the contradictions and complications between them remain unclear
“so they would just have to maintain two systems as far as what kind of chaos that will create or how they're going to reconcile that I don't know I think they're probably testing that”
China's official export data for Q1 2023 claims 17.8% growth to Southeast Asian countries, but cross-verification with those countries' import data shows no corresponding uptick, suggesting China's reported exports are fabricated or 'stuffed.'
“I show you a slide that shows q1 exports China's q1 exports how uh its exports to the U.S Canada Japan all the um all the Western developed countries have drastically declined and it's offset by export increase to Russia Africa and then Asian Asian countries the Southeastern countries and the claim that that that slide it's based on the official CCP export data it claimed that China's export in q1 of 2023 grew 17.8 percent to the Asian countries neither 10 Southeastern countries like Philippines Indonesia Singapore there are 10 of them however if you look at the import data of these 10 countries in q1 we do not see an uptick we do not see a major uptick to that scale from these countries”
People can crack the code on e-CNY offline devices and reuse the same amount of money repeatedly to make multiple purchases without the transactions being detected until later reconciliation, allowing unlimited spending from a finite amount.
“and the worst is people can meddle with the device and crack the code and once they Crack the Code they can use the same amount of money endlessly without getting online they could they could keep buying things in this offline mode um repeatedly using the same amount of money to keep buying things”
The Yangtze River Delta Integration Zone bus line number 2 became the first cross-province bus route to accept digital renminbi payment, marking progress in regional digital currency adoption
“around the same time the Yangtze River delta it's called yanza River delta integration Zone bus line number two officially became the first cross Province bus route that that accepts reminbi digital remain B payment”
Xi Jinping is an ideological man who does not believe in capitalism and thinks money has corrupted China's officials, so he does not hoard money like his Russian counterpart Putin.
“I think uh I've talked about I think GP is an ideological a man of ideological Faith right that's the expression he does not believe in capitalism so I think his problem could be that he does not like money so much I mean there are people out there who like to you know uh depict him as somebody who you know loves money but I really believe that if he likes money a little bit or have a little bit more faith in capitalism things might be better but I don't think he'll he he thinks money has corrupted China he really believes that capitalism has uh corrupted his officials”