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50,000 shoppers give China’s digital yuan its biggest test yet

Bloomberg October 16 | Updated on October 16, 2020 Published on October 16, 2020

A digital yuan will have wider implications for an economy already comfortable with cashless and mobile transactions

Tens of thousands of Chinese this week spent digital yuan at Walmart, gas stations and convenience stores across the southern tech hub of Shenzhen. The experiment — unprecedented in scope and size — went off without a hitch, catapulting the world’s No. 2 economy to the forefront of a race to develop virtual money.

The real-world test is thus far the largest in terms of users and money involved since the Chinese central bank kicked off testing of its digital cash in a handful of cities in April. The government in Shenzhen handed out 10 million yuan ($1.5 million) of the new money — dubbed Digital Currency Electronic Payment, or DCEP — to 50,000 randomly selected citizens through lucky draws on the currency’s wallet app.

Each winner gets 200 yuan to spend at more than 3,000 retail outlets spanning one of the city’s buzziest districts. The giveaway, coming the week of President Xi Jinping’s visit to Shenzhen, marks the biggest step in Beijing’s ambition to keep up with — and control — its rapidly digitalised economy and potentially bolster the yuan’s status as a global currency.

A digital yuan will have wider implications for an economy already comfortable with cashless and mobile transactions, an arena now largely controlled by Alibaba Group Holding Ltd-backed Alipay and Tencent Holdings Ltd’s WeChat.

No threat yet to US dollar’s status as world’s reserve currency

“The trial shows they are ready for the full launch of its digital currency very soon,” said Charles dHaussy, who heads the Hong Kong office for blockchain engineering venture ConsenSys.

Cashless society

China is increasingly a cashless society — with small-town pancake sellers preferring digital wallets over rustling around to make change — but the DCEP is designed to protect the country from having to some day adopt a standard, like Bitcoin or the dollar, that’s controlled by others. Designed to replace cash eventually, it will also help Chinese regulators maintain a better grasp of the country’s money supply.

Apart from tests among end users, the central bank is joining hands with tech giants including Meituan and Didi Chuxing to explore applications for services like food delivery and ride hailing that could drive acceptance.

Lin Song, a 42-year-old telecom engineer in Shenzhen, spent the 200-yuan DCEP he won on his drive to work at a filling station. “It’s as smooth as using any other payment method,” he said. “It’s really up to which platform has the bigger promotions and connects more merchants for me to decide which one to stick with,” he said.

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Published on October 16, 2020
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