The digital yuan in the shadow of dollar hegemony: rethinking asia’s financial autonomy amid US-China tensions
Li Zeng, Wee‐Yeap Lau · Asia and the Global Economy · 2025
The intensifying US–China strategic rivalry is reshaping Asia’s geopolitical economy, with significant implications for financial sovereignty and currency dynamics. This paper examines China’s central bank digital currency, the digital yuan (e-CNY), as both a technological innovation and a geostrategic response to dollar hegemony. Drawing on theories of financial nationalism and monetary hierarchy, it distinguishes nominal currency control from substantive autonomy in cross-border transactions, highlighting structural vulnerabilities arising from regional reliance on the US dollar. The study argues that the e-CNY functions defensively to mitigate risks of financial containment—such as sanctions or SWIFT exclusion—and proactively as a foundation for alternative settlement infrastructures, particularly within Belt and Road Initiative networks and projects like the m-CBDC Bridge. Using a conceptual, theory-driven approach informed by recent policy developments, the paper explores how e-CNY adoption could foster regional monetary pluralism or intensify competition over standards and governance. It concludes that the digital yuan is integral to a broader transformation of Asia’s financial architecture, signalling a new frontier of sovereign assertion and institutional experimentation in a bifurcating global order.