The outbreak of Covid19 has certainly turned the global dynamics and has given birth to new inventions, innovations, and most importantly restructuring from the institutional level to everyday lifestyles. The origin station of global shift China which is the second-largest world economy on a nominal basis in terms of Gross Domestic Product (GDP) and number one ranked in terms of Purchasing Power Parity (PPP) has launched its very own digital currency backed by the Chinese Central Bank. It is known as the electronic Renminbi (e-RMB) that can change the world finance forever. Thus, it is required to know the basics of the Chinese currency, reasons behind launching the e-RMB, technical aspects of e-RMB, China’s monetary system, and e-RMB, analyze how this digital currency will influence the financial dynamics across the globe and how it has threatened the US dollar. Renminbi means the “People’s Money”, official currency of China that acts as a medium of exchange but the Yuan is the unit of account of the country’s economic and financial system. From the past 40 years, China has put much work and efforts on achieving Den Xiaoping vision for globalization and has successfully achieved the trade globalization the day they joined hands with World Trade Organization (WTO), economic globalization by launching the Belt and Road Initiative (BRI) raised the world debt by providing loans and formed their equity, military, and geostrategic globalization by strengthening their People’s Liberalization Navy at multiple places. But Chinese markets are so far lacking behind the financial globalization as the communist ideology works opposite the authoritarian regime. It requires financial openness like in Pakistan in terms of stock markets, debt market, etc. for which China has imposed certain restrictions and without that, it is not possible to replace the dollar as the world’s reserve currency. Until and unless China does not achieve financial globalization they cannot fulfill their 2050 vision. Thus, it is of significance to review the Chinese digital currency in this aspect. Historically, the US exchange rate appreciates whereas Chinese currency depreciates against it. Now, why China depreciates the Yuan against the dollar to accelerate their respective export base. As the Chinese currency depreciates it becomes easier for other countries to buy at lower rates. Similarly, when Pakistan currency depreciates it acts as a catalyst for exporters, IT companies, and especially overseas Pakistanis. We have to analyze how this digital currency will influence the financial dynamics across the globe and how it has threatened the US dollar There are six key reasons why China has launched e-RMB. The foremost reason and long-run strategy by the Chinese economy are to replace the dollar to remove the danger bell of exclusion and sanctions. A sovereign digital currency provides a functional alternative to the dollar settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level. In the global financial system, the former governor of China’s central bank said last year that the digital currency would eventually be integrated into China’s Belt on Road Initiative. China has been pushing to make the Yuan International but the US dollar still makes up about 60% of foreign exchange reserves worldwide in contrast the Chinese Yuan only makes up about 2%. Secondly, China aims to achieve financial globalization as it may also facilitate integration into globally traded currency markets with a reduced risk of politically inspired disruption and security for traders. Thirdly, to achieve more control as cash transactions were offline and transaction data from existing payment platforms were scattered, the Central Bank of China was unable to monitor cash flow in real-time. The digital Yuan is issued and backed by the Chinese central bank it’s not decentralized and will not provide the same anonymity as other cryptocurrencies do. Therefore, it is not an independent currency itself it’s just the digital version of the Chinese Renminbi there’s always a central authority in this digital Renminbi system that’s the Chinese communist regime. Therefore, it is of view that the new digital currency aims to replace Bitcoin and other cryptocurrencies with a system controlled by government authorities. Due to its centralized structure, it would give the authorities more control over the everyday lives of Chinese people. The government can directly control each person’s wallet and decide how you can spend your own money, for example, let’s say the government paid someone a salary of 3,000RMB. If the needed Chinese government can restrict money making it so one can only spend 1000RMB on essentials. The system could also be used to suppress residents to restrict their access to necessities or in extreme cases seize personal property. Fourthly, there is a rise of private money and there is a growing sense that Central banks globally should issue a digital version of cash to prevent the privatization of money by commercial entities and IT firms. For instance, cryptocurrency Bitcoin was introduced by private entities and Libra cryptocurrency by Mark Zuckerberg has already threatened the Central banks across the globe. Fifthly, there is an existing Chinese blockchain. In the past week, China has made its Blockchain-based Service Network (BSN) available for global commercial use. The BSN is led by the Chinese government-backed think tank State Information Center. It is a global infrastructure that claims to help projects create and run new blockchain applications for a lower cost. It also aims to accelerate the development of smart cities and the digital economy. Finally, there is an impact of still raging novel coronavirus pandemic, and the higher health and hygiene awareness among the masses have also added the impetus to the trail of the digital currency. While there is a dramatic drop in the cash in circulation in Wuhan, China. After the initial ground zero of the viral outbreak, most retailers refuse to accept coins or paper money as a precaution against the highly contagious pathogen. This new technology allows the digital currency to be exchanged without an internet connection, and that it can be used to make contactless payments. Besides this, there are certain technical aspects of e-RMB. The People’s Bank of China (PBoC) Digital Currency Research Institute does not want a blockchain-based approach as it is a decentralized and distributed digital ledger. PBoC’s role is centralized bookkeeping and administration. Moreover, the sovereign digital currency will be pegged to the national currency. The digital Yuan e-RMB will have the same legal tender status as cash. China has been working on the Digital Currency Electronic Payment (DCEP) project for the digital version of the Yuan since 2014 and there is talk that the Central government hopes to launch a form of e-currency for the 2022 Beijing Winter Olympics that’s why a screenshot of an internal mobile application showing a digital banknote attracted so much attention on social media. For now, the digital Yuan is too theoretical but how would it affect our daily life, how digital currency saves China’s efforts to create a cashless society resemble what is happening elsewhere in the world. The prevailing drive to go digital is one of the new normal. China is introducing a new digital currency backed by its central bank it is said to make payment easier and faster but an analyst warns it could be used to tighten the regime’s control of the Chinese people. China is testing a new digital currency with a pilot program and Chinese official claims to launch it May 2021. It is set to be the first digital currency used by a major economy after years of development the program began last month in four Chinese cities starting in May some government workers will receive part of their paychecks in the digital currency to use if they need to install an app the currency’s value is pegged to the Yuan, unlike other cryptocurrencies. The PBoC will be the sole issuer of the digital Yuan. Initially, it will be offering digital money to commercial banks and other operators. In contrast, the public would be able to convert money in their bank accounts to the digital version and make deposits via electronic wallets. Now, the question is China alone at the outset of digital currency then certainly no. As many “Central Bank Digital Currencies” (CBDC) are being thought of across the world. The interest in CBDCs is due to factors like declining cash use and privately owned ‘stable coins’ such as Facebook’s Libra. The Swiss Financial Market Supervisory Authority (FINMA) confirmed in April that it had received an application for a payment system license from the Geneva-based association governing Facebook’s planned cryptocurrency Libra. Similarly, the central banks of France and the UK are also both moving forward in respect of CBDCs. Now, will Pakistan also launch its e-Rupee backed by the State bank? Certainly, shortly, Pakistan will also have to introduce it. Moreover, there is also a need to understand the China monetary system and e-RMB. In the existing system, there are forms of money supplies and savings like M0, M1, M2, M3, and M4. With e-RMB a part of the Chinese M0 supply will be digitalized. China’s M0 supply stood at 8.3 trillion yuan in 2019 but the annual increase in this has slackened to just 3-4% since 2012 and is impervious to the surges in credit and loans due to the introduction of WeChat Payments and AliPay. The PBoC Governor Yi Gang said all paper money issued and in circulation or deposits will not be affected. Although, the cash system needs to be reformed now. The velocity of the money in circulation will not be disrupted either. To conclude, we have to analyze how this digital currency will influence the financial dynamics across the globe and how it has threatened the US dollar. Digital payment platforms are already widespread in China, namely Alipay, owned by Alibaba’s Ant Financial and WeChat Pay owned by Tencent but they do not replace the existing currency. With PBoC’s backing, the e-RMB will gain traction fast and give the duopoly of Alipay and Wechat pay tough competition. PBoC has already clarified that transactions facilitated by these platforms fall in the category of M1 and M2 and would not be affected when part of the nation’s MO supply is digitalized. The PBoC is starting trails in Shenzhen, Suzhou, Chengdu, and Xiong’an, a new national development zone on the outskirts of Beijing. The pilot scheme will be expanded to cover high-denomination banknotes. McDonald’s, Starbucks, and Subway were among the 19 mass consumption brands and retailers participating in the trail. A nationwide rollout is expected in two to three years when the PBoC aims to reduce the amount of hard cash it needs to prints. Likewise, ATMs and counters at the bank will become redundant. The upcoming digital Yuan will be “tokenized” money, fully backed by the Central bank of the world’s second-largest economy. Its value draws from the Chinese state’s ability to impose taxes in perpetuity. Other nationals are bound to follow soon. The token will be a private blockchain, a peer-to-peer network for sharing information, and validating transactions, with the People’s Bank of China in control of who gets to participate. To begin with, the currency will be supplied via the banking system and replace some parts of physical cash. It will not be hard cash, given the ubiquitous presence of Chinese QR-code based digital wallets such as Alipay and WeChat Pay. Indeed, it will start small, but the digital yuan can disrupt both the traditional banking and the post-Bretton Woods system of floating exchange rates that the world has lived with since 1973. For China, blockchain and the Yuan digital currency are a national strategic priority almost at the level of the internet. Special Advisor (Pakistan Institute of Management, Lahore operated under Federal Ministry of Industries and Production, Islamabad) and Foreign Research Associate (Centre of Excellence, China Pakistan Economic Corridor, Islamabad)