With advances in digital trading and cryptocurrencies, central banks around the world have had to consider whether they should issue their own digital currency alongside traditional cash or simply phase out cash altogether. As in many countries, the use of physical cash has declined rapidly in China, where an increasing share of payment transactions are conducted with mobile apps such as Alipay or WeChatPay.
China, the birthplace of paper money, is clearly committed to be in frontline of development of digital central bank money. The PBoC began it plan the introduction of digital currency already back in 2014. The initial use of digital currency was tested in April in four urban centres (Shenzhen, Suzhou, Chengdu and the Xiong’an New Area).
During the summer, the central bank also announced cooperation with select firms (including the ride-share firm Didi and food delivery giant Meituan) in the introduction of China’s digital currency. The next set of trials will cover the Beijing-Tianjin-Hebei region, Shanghai and its surroundings, as well as Guangdong, Hong Kong and Macao.
So far the PBoC has been tight-lipped about the technical details of its digital currency. PBoC governor Yi Gang has revealed that the plan calls of replacing physical cash with more traceable digital currency, stressing that it is not intended to replace digital funds held as bank deposits or compete with popular commercial payment applications.