Shenzhen offers $2m of coupons to test digital yuan

China's southern mega-city of Shenzhen will use the central bank's new digital yuan to provide 10 million yuan (S$2 million) of coupons to residents as part of ongoing pilot programmes to test the virtual currency, in a sign that it is approaching widespread roll-out.

The local government of Shenzhen's Luohu district will give residents 50,000 digital coupons of 200 yuan each, which they can spend from Oct 12 to 18 in nearly 3,400 designated shops that can accept digital yuan payments, ranging from supermarkets to convenience stores to petrol stations.

The consumption stimulus programme is the latest move to expand trials of the digital currency, which has been under development by China's central bank since 2014. Earlier in April, the central bank confirmed it was conducting internal trials of the digital currency in four regions, including Shenzhen, and in hypothetical scenarios related to the 2022 Winter Olympics in Beijing.

Those pilots have made "positive progress", Mr Fan Yifei, a deputy governor of the People's Bank of China (PBOC), said on Monday at Sibos 2020, a global financial services networking conference.

As of late August, the PBOC had processed over three million transactions worth 1.1 billion yuan using its digital currency, said Mr Fan.

The central bank has tested more than 6,700 use cases in various industries, he added, noting that transactions could be done via different methods, including barcode scanning and facial recognition.

The PBOC regards the digital yuan as an important financial infrastructure for the future, said Mr Fan.

Six of China's largest state-owned banks have joined a pilot programme to create services for the digital yuan and conduct tests.

With the digital currency designed to replace some physical cash in circulation, Chinese lenders are testing it in real-life payment scenarios with the help of the country's Internet giants, sources told Caixin.

Compared with third-party payment methods, the digital yuan can better protect consumers' personal information and be cheaper for merchants. But it may be difficult for it to compete with entrenched services like Alipay and WeChat Pay, said Mr Chen Wen, director of Southwestern University of Finance and Economics' digital economy research centre.

"The key is to encourage consumers to use the digital yuan."

• This story was originally published in Caixin Global.

Join ST's Telegram channel here and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on October 14, 2020, with the headline Shenzhen offers $2m of coupons to test digital yuan. Subscribe