China pilots state-issued digital currency

China announced plans to launch real-world test of a central bank digital currency on Dec. 9

According to report in local media source Caijing [Chinese language], the test is scheduled to launch in Shenzen and Suzhou, and possibly other cities. 

Despite that, an actual central bank digital currency (CBDC) is probably not coming very soon, the article said. Rumors had been swirling for months that a full CBDC launch was imminent.

Still, launching the pilot is a huge step towards a digital yuan. It makes China the first major economy in which a CBDC actually entered circulation, at least in a limited fashion. 

The current pilot involves four major banks. The test CBDC will “enter real service scenarios such as transportation, education, and medical treatment, reaching… end users,” Caijing reported.

A second, “large scale” phase is scheduled for next year, said Caijing.

Not coming soon

The article was less than clear about how soon a real digital currency could enter widescale circulation.

Caijing did quote an anonymous source “close to the pilot project team.” The person said if both pilots go well, a real CBDC “can said to be a real “coming soon.’”

However, the article also noted that Yi Gang, the governor of the People’s Bank of China has “publicly stated that there is no timetable for the launch of digital currencies, and there will be a series of research, testing, pilots, assessments, and risk prevention, especially the cross-border use of digital currencies,” it said. “There is still a lot of work to be done in the future, and it is not without challenges.”

Beyond that, an unnamed senior technical solution source told Caijing that “from a technical perspective there is a long way to go.”

Controversial telecom Huawei is deeply involved in the CBDC pilot, the article added. Specifically, this involves the firm’s cloud and 5G technologies. The United States has accused Huawei of working so closely with the Chinese government that its 5G equipment could compromise national security. It has moved to ban its 5G equipment in the U.S. and has been pressuring NATO allies to do the same.