China’s experimental $1.5 million (1.16 million pounds) giveaway of digital yuan to Shenzhen citizens ended on Sunday with acclaim from currency analysts – and scepticism from some users saying they preferred existing shopping tools like the ubiquitous Alipay app, according to Reuters.
Under the week-long programme, the People’s Bank of China (PBOC) gave 200 yuan ($29.75) to each of 50,000 consumers selected in a lottery in digital “red envelopes”, echoing the country’s traditional way of gifting cash.
Launched on 9 October, the pilot program was a way for the People’s Bank of China (PBoC) to promote their CBDC project, which has been in the public spotlight a lot as of late. The winners in the giveaway had a limited period in which they could spend their winnings, between 12 October and 18 October, after which any unused amount was to be taken back. The pilot program quickly became popular in the city of Shenzhen, where around 2 million people applied to participate.
The online wallet was accessible via an app, without need for an existing bank account, with payments accepted via smartphone scans in downtown outlets in China’s fourth-biggest city, from luxury goods retailers to snack stores.
The largest such trial to date in the world’s second-largest economy had been hailed by analysts as a step forward for Beijing as it chases what has become a Holy grail among the world’s central banks – the first central bank digital currency.
“The event last week really means that the (digital yuan) has already moved from theoretical internal testing to real world practice,” said Wang Shibin, co-founder of cryptocurrency trading platform HKbitEX.
But this has sparked fears from some overseas observers: if the digital yuan, which operates outside existing financial infrastructure such as Swift, wins international traction, it could undermine U.S. dollar dominance of global payment systems.
In Shenzhen’s Luohu district, more than 3,000 shops from Dolce & Gabbana to supermarkets accepted the digital yuan last week to pay for goods in part or in full using special devices to scan QR codes embedded in a mobile app. It wasn’t immediately clear how much of the total giveaway had been spent, or where.
The Shenzhen authorities report claims that some of the winners were so interested in the project, that they topped their wallets for an additional 901,000 yuan (around $134,000). Other participants however did not look so optimistic, pointing out that the PBoC and the government had to do a better job of convincing consumers of the benefits of the DC/EP system.
Sceptical reactions among some Shenzhen recipients of the giveaway – long used to scanning phones to pay for goods with other systems – showed the central bank and government have work to do in convincing consumers of the benefits of a central bank-backed digital yuan.
“Alipay and WeChat Pay have been out for a long time,” said a shopper who gave only her surname, Zhong. “The new digital currency is similar to those so it’s quite late to just start the trial,” said Zhong, who said she was an accountant.
Zhong said she might consider switch to the new currency in the future, depending on how convenient and secure it felt.
Another downtown Shenzhen user of the online wallet, who gave her surname as Yuan, said that spending her digital currency gift was less convenient than existing options.
“I’m not planning on using it again,” said Yuan, who said she works in finance. “Unless there is another red envelope, of course.”
„For digital yuan to be popularly accepted, banks and other institutions need to invest heavily in applications, marketing and education,” said G. Bin Zhao, senior economist at PwC China.
„Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”