China’s digital currency: Beijing, Shanghai and Guangdong commit to new digital yuan trials in 2021

27-Jan-2021 Intellasia | South China Morning Post | 7:22 AM Print This Post

Beijing, Shanghai and Guangdong, China’s wealthiest province, all made new commitments over the weekend to testing the digital yuan, as the country moves closer to becoming the first in the world to launch a central bank digital currency (CBDC).

Beijing Mayor Chen Jining and Shanghai Mayor Gong Zheng both pledged in work reports that their cities would offer new pilot programmes this year for the Digital Currency Electronic Payment (DCEP), as the digital yuan is officially known.

Neither of the cities’ People’s Congress work reports offered any details on planned trials, but they both linked digital yuan pilots to wider plans for financial development and “opening up”.

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Guangdong Governor Ma Xingrui also said in a work report that the province would promote digital yuan pilots and support a digital currency innovation zone in Shenzhen, China’s tech hub sometimes dubbed the country’s Silicon Valley.

“The pace [of developing and testing the DCEP] is relatively fast,” said Wang Pengbo, a Beijing-based analyst who follows China’s finance industry. “It’s quite possible for China to become the world’s first nation with a digital sovereign currency.”

Guo Weimin, chief scientist at the state-owned Bank of China, also made comments last week calling for the country to speed up adoption of a digital currency because of the economic challenges caused by the coronavirus pandemic. A digital currency would make it easier to trace cash flows and enforce financial regulations, he said.

While China has not offered a timetable for an official launch of the DCEP, the People’s Bank of China (PBOC), the country’s central bank, is aiming for a wider test of the digital yuan before the start of the 2022 Winter Olympics, scheduled to take place in Beijing next February.

Zhou Ziheng, chair of Zhejiang Modern Digital Finance Research Institute, previously said that the DCEP would eventually shift its focus from consumer use to business and government applications because it would involve digitisation of financial assets, differentiating the digital currency from more common digital payments.

For now, though, local digital yuan pilot tests have remained focused on consumers in large cities.

“The tests start in big cities where commercial infrastructure, especially the payment system, is more complete, and the residents are more open to new things,” said Wang, the analyst in Beijing. “When there’s more data and the system becomes more mature, it’ll be taken to smaller cities.”

As of last week, Shenzhen had finished three digital yuan trials. The first two made a total of 30 million digital yuan available to residents of two districts, who were selected by lottery. The latest pilot distributed 20 million digital yuan to qualifying local businesses.

The DCEP was distributed using digital red envelopes inspired by gifts traditionally given out during holidays and special occasions. The tradition’s digital upgrade was popularised by mobile payment platforms Tencent Holdings’ WeChat Pay and Ant Group’s Alipay.


Category: China

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