Andy Mukherjee: Is China’s interest-paying e-CNY going to challenge the almighty US dollar?

Subscribe to enjoy similar stories. The highest US tariffs in almost a century have had a muted impact so far on global growth, but Asian policymakers aren’t lulled by the calm. They’re taking their cues from jumpy markets and plotting what appears to be a mutiny against King Dollar.

Those searching for evidence of it in payment flows are looking in the wrong place. For years to come, de-dollarization will remain hidden in alterations to financial plumbing. The cumulative effects will take time to show.

With little fanfare, China’s e-CNY, its official digital currency, has gone from being interest-free cash to a yield-bearing product of commercial banks. It’s a profound change. Until now, the problem with e-CNY adoption was that even Chinese state workers who received their salaries as tokens in e-wallets would immediately swipe them into their bank accounts.

Now they don’t need to. For them and their banks, e-CNY is no different from a regular deposit account. Payment apps like Alipay and WeChat Pay work with both.

This move won’t dent the greenback’s dominance: The dollar is the preferred global payments currency with a 50%-plus share, more than twice that of the euro and way ahead of the yuan’s 3%. But an e-CNY that’s more widely used in China lowers the threat of further dollarization in a scenario where local savers switch to dollar stablecoins. Paying interest on e-CNY is a defensive step because last year’s US Genius Act prohibits stablecoin issuers from offering yields.

But a moat against stablecoins won’t be enough. To take on the dollar’s hegemony more directly, China will have to attack it overseas. But outside of Hong Kong, where banks are making yuan-denominated trade finance available to clients in