Shenzhen has just announced that it is giving away ‘free’ digital yuan in a bid to stimulate consumption. The gifts are 50,000 electronic red packets, each containing 200-yuan (US$29.5) worth of digital currency to selected consumers in the current digital currency pilot.
You can read the news (in English) here.
I am attaching additional details from one Chinese report by translating them here:[Original Chinese Text (Click to see)
By the offering of Shenzhen’s digital RMB red packet , we can find or confirm the following four aspects of information:
First, digital renminbi currently has many application scenarios in Shenzhen. Just in Luohu District alone, 3389 merchants have completed the digital renminbi system transformation and can use digital renminbi red packets. Merchants participating in the test, including Sinopec, China Resources Vanguard, Wal-Mart and other well-known merchants. So it reflects the situation of openness and compatibility of digital renminbi since Chinese enterprises and foreign enterprises are involved.
Second, digital renminbi is mainly positioned for small, retail payments. The merchants that can use digital RMB this time, including shopping malls, supermarkets, living expenses, daily necessities, and food and beverage consumption, are closely related to the daily consumption of ordinary people but do not include buying houses , car purchase and other relatively large purchase scenarios. This is mainly because the digital renminbi is positioned as a replacement for M0 (cash in circulation).
Third, the digital RMB adopts the “account loose coupling” model. To receive the digital renminbi red packet, one has to download the digital renminbi app, complete the corresponding registration and logging in, one can use it without tying to a bank account. This will allow the digital RMB to be used widely, meet the needs of the public who do not have bank accounts and payment accounts, and better execute its role and mission as legal tender.
Fourth, there are four banks participating in the test. They are Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank, which are commonly referred to as the “Big Four Bank”. These four banks will be the main exchange banks for digital renminbi in the future. Of course, other banks may also participate in digital renminbi in other forms, such as participating in circulation services with the four major banks.
Translator’s notes : China Resources Vanguard, (华润万家) is a popular supermarket chain in China and it was founded in Hong Kong.
I see the piloting of the digital reminbi as part of its new dual-circulation development strategy. The actual wording of this strategy is “gradually forming a new development pattern in which the domestic big circulation cycle is the main component and the double cycles consisting of domestic and international circulation complimenting each other (逐步形成以国内大循环为主体、国内国际双循环相互促进的新发展格局).
Implementing digital reminbi would reduce transaction costs to encourage domestic consumption since there will be a sprouting of digital banks with reduced manpower overheads. This would encourage consumption since transaction costs (B2B, B2C) are negligible as banks could charge based on volume instead of per transaction.
Red packet (红包 hóngbāo literally red-packet) means money wrapped in a red packet (example is shown) which is used as a gift. They are commonly used as Lunar New Year gifts (from parents/seniors to children) and wedding gifts.