I don't think China will totally abandon their fiat money in lieu of its proposed digital yuan for the simple reason that they will lose their ability to print money out of thin air to float their economy.
With digital money, people can easily track it if ever they try to mint fresh digital assets into circulation so that I don't think China will ever like it, allowing prying eyes on what they are doing behind the curtain. Imho.
The Chinese government is already warning its citizens that they are not too keen on non-cash, including digital means of payment, and also indicates a significant role in the state of the use of cash. Therefore, China is not going to give up cash in the foreseeable future.
China's digital yuan is a stable currency, and therefore it will compete primarily with stable state coins, as well as private and commercial stable coins. The digital yuan should not have a noticeable effect on bitcoin and the dollar. At the same time, I think that the digital yuan will strengthen China’s financial position on the world stage.