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Economy

'No timetable' on digital yuan: China central bank governor

Yi Gang cites need to manage risk to quell market speculation over launch

Speculation over China's e-yuan project has grown since Facebook announced plans to introduce its own cryptocurrency. (Photo by Takaki Kashiwabara)

BEIJING -- The People's Bank of China has "no timetable" for launching its planned digital currency, the bank's governor said Tuesday, in his first direct mention of the e-yuan project in a news conference.

Speaking in advance of the 70th anniversary of modern China on Oct. 1, Yi Gang cited the need for studies, tests and evaluations before adopting the virtual currency, which he said would be aimed to partly replace cash. A team at the central bank had made "positive progress" in studying digital currencies since starting work in 2014, he added.

Since U.S. social networking titan Facebook's announcement this year of plans to introduce its own cryptocurrency called Libra, PBOC veterans and officials have alluded numerous times to the e-yuan project, leading to market speculation of a potential launch this year. Yi's statement appeared aimed at quelling such speculation, while suggesting work on the project is coming along.

The digital coin would operate under a two-tier framework involving the central bank and commercial lenders, and "would not change" the existing currency supply routes and framework, Yi said. The statement was taken to mean the central bank would be the body to issue the e-yuan, which would then spread to households and businesses by way of commercial banks.

Yi said administration of the currency would be centralized, in a likely further indication the central bank would manage issuance and circulation. He added that the coin could be underpinned by blockchain -- the distributed ledger technology on which virtual currencies like bitcoin are based -- or by other, new methods that evolve from existing electronic payment tech.

The biggest hurdle Yi cited was readying the coin to be used "across borders," a goal that would require having the e-yuan up to regulatory scratch to combat money laundering, terrorist financing and tax evasion.

Yi said China's economy is moving in rational intervals and expressed confidence in the prospect of stable growth. He added that the bank would continue its prudent monetary policy while maintaining strength, and would not resort to "flood-like" stimulus or follow other central banks in sharply lowering key rates.

His words were taken to mean the PBOC would refrain from large-scale easing, but continue to fine-tune lending rates, as well as reserve ratios dictating how much cash banks must keep on hand.

Yi added that in his view, a leading economic system that could maintain normalcy in monetary policy for several years would become a beacon of hope in the global economy and a target of envy in markets. The statement appeared to hint that Beijing aims to steer the economy in a stable fashion at least for the next few years and avoid drastic easing measures.

By keeping key rates above those of advanced nations, China likely aims to lure overseas investors' cash into its financial market, hoping to shore up the current account balance hit by such factors as the U.S. trade war.

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