Digital Yuan Cross-Border Expansion: ASEAN and Gulf Countries Join Pilot
China’s digital yuan, officially known as the e-CNY, is moving beyond its domestic testing phase into a new era of international adoption. What began as a pilot program in a few Chinese cities has now evolved into a cross-border initiative involving several ASEAN and Gulf countries. This expansion represents a major step in China’s effort to modernize global payments and reduce dependence on the U.S. dollar–dominated SWIFT network. Backed by the People’s Bank of China (PBoC) and supported by institutions like the Bank for International Settlements (BIS), the project integrates digital infrastructure, blockchain-based settlement, and foreign trade digitization. As reported by Reuters, Nikkei Asia, and CGTN, the move could reshape regional financial systems by offering faster, cheaper, and more transparent cross-border transactions.
From Domestic Pilot to Global Integration
The digital yuan was first tested in 2020 in cities like Shenzhen, Suzhou, and Chengdu as part of China’s plan to create a sovereign digital currency controlled directly by the central bank. Over the next four years, the PBoC expanded testing to 26 cities and recorded over 250 million transactions worth more than 2 trillion yuan. By 2025, the e-CNY ecosystem had reached a level of technological maturity that enabled real-world cross-border experimentation.
According to Nikkei Asia, China has signed agreements with several ASEAN nations including Thailand, Singapore, and Malaysia to connect their central bank digital currency (CBDC) systems through the “mBridge” platform. This initiative, launched jointly by the PBoC, the Hong Kong Monetary Authority, the Bank of Thailand, and the Central Bank of the UAE, allows instant settlement of trade invoices between participants using digital currencies instead of correspondent banking systems.
The Gulf region’s involvement marks another breakthrough. The UAE and Saudi Arabia have joined the pilot to explore using the digital yuan for energy trade settlements and cross-border investments. With the Gulf Cooperation Council countries increasingly trading with China in local currencies, the digital yuan offers an efficient tool for clearing payments directly in real time.
Technical Architecture and Blockchain Integration
The digital yuan’s success lies in its architecture a hybrid design combining central bank control with distributed ledger technology. Unlike fully decentralized cryptocurrencies, the e-CNY uses a permissioned blockchain operated by the PBoC and authorized financial institutions. This ensures traceability, transaction speed, and compliance with regulatory frameworks.
The mBridge platform acts as a bridge between multiple CBDC systems. It uses a shared distributed ledger that allows instant settlement while maintaining each country’s monetary sovereignty. In early 2025, the BIS Innovation Hub reported that 164 cross-border transactions totaling over $22 million were processed through mBridge in test environments, with average settlement times under 10 seconds.
For ASEAN participants, this system addresses a long-standing challenge: high costs and delays in remittance and trade finance. Traditional cross-border payments can take up to three days and involve intermediary banks charging up to 3% in fees. With digital yuan settlement, fees fall below 0.1%, and liquidity is managed through automated smart contracts that match buyers and sellers across currencies.
According to CGTN, the PBoC has also developed programmable payment features within the digital yuan ecosystem. These allow trade agreements, customs clearances, or logistics milestones to trigger automatic payment releases. For example, once goods arrive at a port, smart contracts can settle invoices without manual intervention, reducing fraud risk and administrative costs.
Geoeconomic Implications for Global Trade
China’s cross-border digital currency strategy has significant implications for global finance. By linking with ASEAN and Gulf economies, Beijing is constructing an alternative settlement corridor outside the SWIFT network. This does not mean replacing the dollar immediately, but rather diversifying international finance channels to reduce dependency on any single system.
According to Reuters, the ASEAN bloc now accounts for nearly 15% of China’s total trade, surpassing the European Union as its largest trading partner. Similarly, China’s trade with Gulf countries has exceeded $300 billion annually, with energy imports forming a major component. Integrating these transactions into the e-CNY framework provides efficiency while enhancing China’s financial influence.
For participating nations, the advantages go beyond cost reduction. The digital yuan’s transparent and traceable design helps curb money laundering and improves regulatory oversight. Smaller financial institutions can participate in global trade without maintaining costly dollar reserves or relying on large Western banks. This financial inclusion aspect aligns with China’s broader Belt and Road Initiative (BRI), promoting digital infrastructure cooperation across Asia, Africa, and the Middle East.
The system also strengthens bilateral trust. In 2024, Thailand’s central bank tested digital yuan payments for cross-border tourism and found that settlement times decreased by over 95%. Malaysia and Singapore are now exploring similar applications for supply-chain finance and retail e-commerce transactions. The Gulf countries, meanwhile, are considering digital yuan-based platforms for settling oil contracts, potentially setting a precedent for de-dollarization in commodity trade.
Regulatory Challenges and Global Reactions
Despite its promise, the e-CNY’s global expansion faces regulatory and geopolitical challenges. Western policymakers remain cautious, viewing the project as part of China’s attempt to build financial influence. The U.S. Treasury and the European Central Bank have warned that a large-scale adoption of the digital yuan could allow China to bypass sanctions and data monitoring mechanisms.
However, China insists that the e-CNY is primarily a financial innovation rather than a geopolitical weapon. The PBoC has repeatedly emphasized that its cross-border system complies with anti-money laundering (AML) and counter-terrorist financing (CTF) standards. To address privacy concerns, it has adopted a “controllable anonymity” framework users can conduct small transactions anonymously while larger transactions remain traceable by regulators.
At the same time, international organizations such as the BIS and the International Monetary Fund (IMF) have shown interest in studying China’s model. They recognize its potential to set technical standards for interoperability among future CBDCs. Analysts note that the success of mBridge could accelerate global efforts toward digital currency standardization, allowing smaller economies to leapfrog outdated banking systems.
The Future of Digital Trade and Settlement
The expansion of the digital yuan represents more than a monetary innovation it’s a blueprint for a new digital trade infrastructure. In the next five years, experts expect the PBoC to formalize bilateral clearing arrangements with more partners, including Pakistan, Indonesia, and Egypt. These arrangements will integrate payment data, logistics tracking, and customs clearance on a single blockchain ledger.
Moreover, the e-CNY could become the settlement currency for China’s overseas Belt and Road projects, facilitating infrastructure loans and procurement. The ability to execute programmable transactions means contractors and suppliers can be paid automatically upon meeting performance milestones. This efficiency is expected to attract participation from global corporations seeking transparent financing mechanisms.
For China, the digital yuan’s cross-border expansion serves both economic and strategic goals. Economically, it enhances transaction efficiency and supports export-driven growth. Strategically, it promotes a multipolar monetary ecosystem that complements the country’s broader vision of technological sovereignty.
Conclusion
The digital yuan’s entry into ASEAN and Gulf markets signals a historic step toward global digital finance integration. What began as a domestic experiment has become a cornerstone of China’s international economic strategy. With AI-driven payments, programmable contracts, and blockchain interoperability, the e-CNY offers a glimpse into the future of cross-border trade faster, greener, and more inclusive.
While global reactions remain mixed, the success of pilot programs in Asia and the Middle East suggests that digital currency diplomacy is here to stay. As China continues to expand the e-CNY’s reach, it is not just exporting technology but redefining the architecture of international finance. The world’s next financial revolution may well begin with a line of digital code written in Beijing.
