During this year’s Dragon Boat festival, Beijing and Shanghai launched giveaways of China’s digital yuan worth a combined total of almost US$10 million to members of the public, in an experiment designed to bring the state-run digital currency one step closer to becoming a reality.
The new currency, e-CNY — also known by its project name, DCEP (Digital Currency/Electronic Payment) — has undergone 13 rounds of large-scale testing in eight cities.
In Shanghai’s e-CNY giveaway — the city’s first — Hawk Yan, a 21-year-old computer science student at Shanghai University, was one of the winners, pocketing 55 digital yuan (US$8.53). He was happy to spend his modest winnings, but said he might not use the currency had it not been given to him.
Yan spent CNY9.90 (US$1.54) on a pot of yogurt in a convenience store on Nanjing Road. He said the basic payment process was similar to using Alipay or WeChat Pay: open the app and swipe up to show a QR code and complete the transaction.
Nanjing Road, where Yan spent his e-CNY, is one of Shanghai’s main shopping streets and a target for plans to achieve the highest retail penetration by e-CNY in the city. It has been identified as a “key experimental street for digital yuan” in the future, according to a report by financial news outlet Jiemian.
But if Yan’s experience is anything to go by, Nanjing Road still has some way to go before e-CNY becomes embedded in day-to-day commerce.
“When there are no free digital yuan envelopes, I think I may not use e-CNY as my currency,” Yan said. “From my experience, the stores that support digital yuan are not that common. I just used [e-CNY] in convenience stores. For some coffee shops, like Starbucks, there is no support for the digital yuan.”
No luck at Starbucks
Before heading to the convenience store, Yan tried to spend his e-CNY at Starbucks, a bubble tea shop and a street food outlet, none of which accepted it. Hundreds of shops in the city accept the currency, but in a metropolis that boasts tens of thousands of retail outlets, they remain exceptions.
Aside from the scarcity of places at which to spend e-CNY, another inconvenience is its transaction processing speed and limited functionality.
An assistant at a convenience store on Nanjing Road said she had seen more than one in every three customers use e-CNY at the store in recent days, and that the transaction process was similar to those of other payment systems. However, she said that once the balance of e-CNY wallets began to run low, it was quite complicated to link them with bank accounts to top them up.
Yan also said the processing time was slower than Alipay or WeChat Pay.
“After completing the payment, it took me one to two minutes to receive a receipt.” he told Forkast.News.
At the same time as Shanghai’s giveaway, Beijing ran its own e-CNY lottery, with 200,000 people each receiving 200 digital yuan. It was the second large-scale trial of e-CNY in the capital, and four times the size of the previous test in February.
In the Beijing experiment, e-CNY could be spent at large shopping malls in the city center and in Shijingshan, a suburb of Beijing that will be a site for the 2022 Winter Olympics. About 200 vendors at and around the venues for the 2022 games are now accepting e-CNY payments.
Amid the tests in Shanghai and Beijing, e-CNY has also been tried out in the Xiong’An new area, a state-level development 100km southwest of Beijing that is supervised directly by the central government. Some workers in Xiong’An have started to receive their salaries in e-CNY, according to an announcement by the Xiong’An government.
Yao Qian, a former People’s Bank of China director, has said the digital yuan will not be merely a simulation of cash, and that its digital characteristics, such as a capacity for smart-contract functionality should be harnessed to counter the growing prevalence of private payment platforms.
Whatever the actual timetable may be for tapping the full digital potential of e-CNY, some industry observers expect the currency to be formally launched at next year’s Winter Olympics. The question then, as now, will not be whether the central bank will push the use of its digital money, but whether people and businesses will forsake the folding stuff in its favor.