The Foreign Service Journal, April 2023

24 APRIL 2023 | THE FOREIGN SERVICE JOURNAL unless there is a reason due to suspected criminal activity. But given the CCP’s power to deem activity criminal at will, this is a paper-thin assurance against government abuse. People’s Bank describes the privacy protection within the e-CNY system as “con- trollable anonymity.” Users can be anonymous to the government only as long as the state allows them to be. The e-CNY is a boon for CCP tracking and monitoring of residents, and its programmabil- ity will make it easier to cut off citizens’ access to basic services if they run afoul of the state. For example, it is theoretically possible to programwallets of certain users (by location, demographic, or some other designation) to block certain types of transactions. China’s Digital Currency Activity and the U.S. While the electronic yuan won’t displace the dollar, it cer- tainly will give the PRC an easier tool for economic retaliation against U.S. firms doing business in China. As the pilot expands and U.S. firms in the country accept e-CNY payments (as many probably will do given the allure of the retail market), they will need to understand that the People’s Bank will be able to block their e-CNY wallets at the proverbial flip of a switch. Such retali- ation is not theoretical. In 2021, the PRC pushed a successful campaign to remove Swedish apparel store H&M frommajor Chinese e-commerce sites and geolocation and ride-sharing services after the firm posted concerns about forced labor in the Xinjiang region on its company blog. Also, U.S. firms using e-CNY will be providing data about their company spending and operational patterns directly to the PRC government. The PRC will likely analyze that data and use the insights gained to advance domestic competitors. The collection of more, finer-tuned data overall gives the government much more consumer information than other governments can glean from their own populations. If “data is a factor of production,” as the CCP has said in state planning documents, Chinese firms will benefit greatly from a wealth of digital inputs. Although the e-CNY is primarily for domestic retail use, the PRC is simultaneously developing a way to leverage it for cross-border trade. As a participant in the Bank for International Settlements’ mBridge initiative, in late 2022 the PBOC com-