Digital renminbi

In April 2020, testing began in four cities around China (Shenzhen, Suzhou, Chengdu and Xiong'an) to improve the currency's functionality.[9][12] Areas of testing include the currency's reliability, stability, ease of use, and regulatory concerns such as the prevention of money laundering, tax evasion and terror financing.[12] The currency could be transferred to bank accounts or used directly with certain merchants, and could be controlled via apps on one's smartphone.[9] As of April 2021, more than 100,000 have downloaded such apps, which were developed by banks, including six state-owned banks.[2][18] The digital currency could be spent in stores like Starbucks and McDonald's in China, as well as online shopping platforms like JD.com.[2][18] Local governments, partnering with private businesses, have distributed more than 150 million RMB as incentive to attract test users of digital RMB and to stimulate consumption.[4][18]

As of April 2021, testing has been expanded to six additional regions: Shanghai, Hainan, Changsha, Xi'an, Qingdao and Dalian.[19]

At the end of 2021 there were 261 million users in the extended trial who had made US$13.8 billion of transactions [20] It has also been rolled out for foreign attendees at the 2022 Winter Olympics in Beijing, where it has seen limited use due to entrenched digital currencies and Visa, as well as lack of publicity.[21]

On March 31, 2022, People's Bank of China announced that the testing has been further expanded to six additional regions: Tianjin, Chongqing, Guangzhou, Fuzhou, Xiamen, and six cities in the province of Zhejiang that are hosting the 2022 Asian Games (Hangzhou, Ningbo, Wenzhou, Huzhou, Shaoxing, and Jinhua). Another news statement from PBOC shows that the city of Beijing and Zhangjiakou are also being included on the list of testing after the 2022 Winter Olympics.[22][23]

On December 16, 2022, the testing of Digital renminbi has been further expanded into five additional regions: Jinan, Fangchenggang, Nanning, Kunming, and Xishuangbanna.[24]

From May 2023, Changshu in the province of Jiangsu started to rollout salary payments in e-CNY for government employees as well as staff at stated-owned companies and public institutions.[25]

On July 11, 2023, Bank of China, China Telecom, and China Unicom announced the joint launch of SIM card-based e-CNY wallets, which allow offline payments using the SIM's NFC function.[26][27]

According to World Bank data, in 2017, almost 20% of Chinese over 15 did not hold a bank account.[31] As of February 2021, 87% of the population have access to fintech apps such as WeChat Pay and Alipay,[32] which together account for more than 90% of electronic payments in China as of 2021.[7]

Chinese fintech apps have largely leapfrogged traditional card-based payment networks in China, due to the fintech apps' ease of use and much cheaper fees for merchants.[33] Transfers within Wechat Pay and Alipay are free within their respective ecosystems, and generally have a 0.1% fee for transfers outside their ecosystem, much lower than the 2–4% fee imposed by credit cards.[33] Wechat Pay and Alipay each have over a billion users in China,[34][35] and are used by over 90% of the population in China's largest cities as their preferred payment method.[33] The digital yuan might sideline these private digital payment platforms.[7]

The digital RMB could provide a cheaper and more practical alternative to international transactions that are outside the U.S.-led global financial system, especially for countries with strong ties to China.[2][6] It is feared by U.S. commentators and officials that the digital RMB would weaken the ability of the U.S. to monitor and control the global financial system, through "dollar weaponization," such as sanctions[2][36] and through its intelligence access to the SWIFT payment system.[37]

Some commentators have said that the U.S., which has only started to consider to issue a government-backed digital currency, risks falling behind China and weakening its dominance in the global financial system.[38][36] The digital renminbi has been described as a "national-security issue" threatening the US dollar by Josh Lipsky at the Atlantic Council think tank.[2] It is also seen by commentators as a tool to allow Chinese authorities to keep domestic control and surveillance capabilities.[2][39]

Some argue that the real barriers to internationalisation of the renminbi are China's capital controls, which it has no plans to remove. Maximilian Kärnfelt, an expert at the Mercator Institute for China Studies, said that a digital renminbi "would not banish many of the problems holding the renminbi back from more use globally". He went on to say, "Much of China's financial market is still not open to foreigners and property rights remain fragile."[8] Victor Shih, a China expert and professor at the University of California San Diego, said that merely introducing a digital currency "doesn't solve the problem that some people holding renminbi offshore will want to sell that renminbi and exchange it for the dollar", as the dollar is considered to be a safer asset.[40] Eswar Prasad, an economics professor at Cornell University, said that the digital renminbi "will hardly put a dent in the dollar's status as the dominant global reserve currency" due to the United States' "economic dominance, deep and liquid capital markets, and still-robust institutional framework".[40][41] The U.S. dollar's share as a reserve currency is above 60%, while that of the renminbi is about 2%.[40]

U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell have said that they are studying the effects of digital currencies like the digital RMB and how they will affect the U.S. dollar.[2]

The EU is also considering to issue a digital euro.[42] According to Clingendael Institute, digital currencies such as the digital yuan threaten the growing position of the euro as an alternative to the dollar.[43]