The way I see it, it will "work" because it's not being released as a medium of exchange for a free market, they will force their population to use it. They've already been pretty successful in doing so with alipay and wechat pay, it will be a cheaper infrastructure and transition for them to move to this digital yuan

Like you said it's going to eliminate any sort of grey economy where actual free trade can happen. I think they just bank on the fact that their citizens are willing to play ball with any shit they come up with for the "greater good" the indoctrinating is real