China’s digital yuan is coming to Beijing, Hong Kong, Macau, and several provinces.
China’s Commerce Ministry said on Aug. 14 that it is expanding its central bank digital currency experiment to the capital and some of the country’s wealthiest regions, the Wall Street Journal reported.
The pilot program launched earlier this year in four cities, Shenzhen, Suzhou, Chengdu and Xiong’an. The expanded region will include Beijing, Hong Kong, Macau, and the prosperous Guangdong province, as well as Tianjin, Hebei, and the Yangtse River Delta.
The People’s Bank of China may also roll out pilots in some of the country’s poorer areas in the center and west of the country, the paper reported.
A long lead
The digital yuan is formally known as DC/EP, for digital currency/electronic payment, at least during the testing phase. Screenshots of the app have already been seen online.
China began testing the currency with several major firms in July, including food delivery giant Meituan Dianping and ride-hailing firm Didi Chuxing. Both are owned by Tencent, which also owns WeChat Pay—one of the country’s two dominant mobile payment apps. Along with Alibaba’s AliPa the two companies control well over 90% of the country’s large and rapidly growing digital payments market.
Both Meituan Dianping and Didi Chuxing are active in many other businesses, and together process billions of dollars in small daily transactions.
fight criminals, U.S. dollar
The central bank has said a digital currency will help it fight money laundering, tax evasion, and gambling. But it will also give the state another strong surveillance tool, despite promises of what China calls “controllable anonymity.”
Beyond that, digital currencies raise other concerns, notably that they could make bank runs faster, more severe, and harder to stop during times of economic upheaval
CBDC’s are also considered potential challengers to the U.S. dollar’s position as the world’s reserve currency, which brings with it a great deal of economic influence.
That not just of interest to China. Bank of England Governor Mark Carney spoke specifically of the issue a year ago, saying a digital currency could “dampen the domineering influence of the US dollar on global trade.”
When it comes to CBDCs, the U.S. lags far behind the rest of the world, with Federal Reserve Governor Lael Brainard announcing only yesterday that the U.S. is actively researching a digital dollar. Treasury Secretary Stephen Mnuchin has said he does not believe a CBDC will be launched until 2025 at earliest.