ONE hundred thousand residents in Suzhou, Jiangsu province, selected through a lottery, are participating in an upgraded pilot program of the digital renminbi that began on Friday. Unlike their 50,000 Shenzhen counterparts who participated in a trial program in October in which they had to spend the digital money offline, those in Suzhou can use the 200-yuan ($30.6) virtual red packets given them by the government to purchase goods not only in designated brick-and-mortar shops, but also via the official app of online retail giant JD until Dec 27. This marks a major step forward for the official launch of the digital renminbi, and signals the momentum is picking up pace. With the advent of the digital economy era, digital currencies are expected to take center stage. The novel coronavirus pandemic has further accelerated the development of contactless, mobile payments and the building of a cashless society, with central banks in major economies competing with each other toward this end. The European Central Bank, for example, has said it is “very seriously” looking at the creation of a digital euro.
At the forefront of this trend, China started testing a digital currency as early as 2014, and it is considering revising its bank law to pave the way for issuing of the digital renminbi. Its digitalization is also part of the country’s bid to internationalize its currency. For example, the digital renminbi could make it much easier to settle trade transactions with Belt and Road partners as they would no longer have to rely on a third-party currency to complete transactions. Compared with the traditional renminbi notes and coins in circulation, the digital form of the currency — issued by the People’s Bank of China, the country’s central bank — enjoys many advantages. It could help cut the high costs of printing and distributing traditional paper notes, prevent illegal activities such as money laundering and terrorism financing thanks to its traceability, and make transactions much more convenient. For example, digital renminbi transactions could be done without the internet, smartphone to smartphone, and with the currency held within a digital wallet it would not need to be linked to a bank account as required by the hugely popular Alipay and WeChat Pay. A plan is already in place to roll out the digital renminbi across China in the near future. Although before that, the pilot program is expected to be expanded to include more places in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area.
– China Daily
