The status of unofficial digital currency, such as Bitcoin and Ethereum, may decline. People may be reluctant to use them because the government-backed ones have come out. Digital currency uses peer-to-peer networks and does not go through a financial institution, like a bank.
China is planning a major expansion of testing for the central bank-led digital yuan, according to a Wall Street Journal report on Friday.
China is very aware that if the US were to fully weaponise the dollar’s dominance it could cause chaos within its financial system.
China’s largest state-run banks operating in Hong Kong are taking tentative steps to comply with U.S. sanctions imposed on officials in the city, seeking to safeguard their access to crucial dollar funding and overseas networks.
"A good part of the Chinese economy is open," Bernstein said. "These companies now have a revenue stream post-COVID, so to speak, which makes them more palatable to go public."
China should prepare for potential US sanctions by increasing the use of its own financial messaging network for cross-border transactions in the mainland, Hong Kong and Macau, according to a report from the investment banking unit of Bank of China.
HKEX has depended on a strategy of being the gateway to China through its stock and bond trading links.
President Donald Trump said last week the U.S. is putting 10% tariffs on another $300 billion worth of Chinese goods starting September 1.
The yuan plunged beyond 7 per dollar for the first time since 2008 amid speculation Beijing was allowing currency depreciation to counter President Donald Trump’s latest tariff threat.
European stock markets have fallen after the surprise decision by Donald Trump to impose new tariffs on a further $300bn of Chinese imports.