Digital currency doesn't change the fact that people don't trust the Chinese government. They regularly devalue the yuan anytime there is demand for it. Their export-heavy economic model favors a weak currency, which makes for a poor store of value vs. the USD.
Even if they make Yuan digital it can’t still force other nation to use it, China is already digitalized and make most of their transactions cashless so this is not new to them. Well, I also heard about the news of Digital USD which can still compete with Yuan so this is not the end of the fight i think since big countries will also follow the growing technology. If bitcoin remains decentralized, then Yuan can’t still change the fact that more people now wants to control their own money and that’s what bitcoin provides to many.