(Bloomberg)—Tens of thousands of Chinese this week spent digital yuan at Walmart, gas stations and convenience stores across the southern tech hub of Shenzhen. The experiment—unprecedented in scope and size—went off without a hitch, catapulting the world’s No. 2 economy to the forefront of a race to develop virtual money.
The giveaway, coming the week of President Xi Jinping’s visit to Shenzhen, marks the biggest step in Beijing’s ambition to keep up with—and control of—its rapidly digitalized economy and potentially bolster the yuan’s status as a global currency. A digital yuan will have wider implications for an economy already comfortable with cashless and mobile transactions, an arena now largely controlled by Alibaba Group Holding Ltd.-backed Alipay and Tencent Holdings Ltd.’s WeChat.
China is increasingly a cashless society—with small-town pancake sellers preferring digital wallets over rustling around to make change—but the DCEP is designed to protect the country from having to some day adopt a standard, like Bitcoin or the dollar, that’s controlled by others. Designed to replace cash eventually, it will also help Chinese regulators maintain a better grasp of the country’s money supply.
“I’ll consider making this my first option over WeChat or Alipay, because it’s backed by the state,” said Wang Jinchao, a 27-year-old user-growth manager with a Shenzhen online learning startup, who was among the less than 3% of lucky applicants to win the DCEP handout.
Users need to register a dedicated account for DCEP transactions using their local mobile numbers, and download a wallet app linked to one of China’s Big Four state-owned banks. Merchants and buyers can then scan each other’s QR code generated by the app for transactions. The app shows a portrait of Mao Zedong at a page where users check their balances, similar to the 100-yuan physical banknote.
Apart from tests among end-users, the central bank is joining hands with tech giants including Meituan and Didi Chuxing to explore applications for services like food delivery and ride-hailing that could drive acceptance.
Lin Song, a 42-year-old telecoms engineer in Shenzhen, spent the 200-yuan DCEP he won on his drive to work at a filling station. It’s as smooth as using any other payment method, he said. “It’s really up to which platform has the bigger promotions and connects more merchants for me to decide which one to stick with,” he said.Favorite