A look at China’s pilot of digital yuan via Shenzhen’s “red packet”

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)

而从深圳这次数字人民币红包申领,我们可以发现或确认以下四个方面信息:

  第一,数字人民币在深圳已经有了较多的应用场景。此次仅在罗湖区,就有3389家商户已经完成数字人民币系统改造,可以使用数字人民币红包。参与测试的商户,包括中石化、华润万家、沃尔玛等知名商家,既有中资企业也有外资企业,体现了场景的开放性和包容性。

  第二,数字人民币主要定位于小额、零售支付。此次可以使用数字人民币的商户,包括商场超市、生活服务、日用零售、餐饮消费等四大类型,都与老百姓日常生活消费密切相关,但不包括购房、购车等相对大额的支付场景。这主要是因为数字人民币定位为M0(流通中现金)替代。

  第三,数字人民币采用“账户松耦合”模式。领取数字人民币红包,下载数字人民币APP之后,完成相应的注册、登录之后,无需绑定银行账户即可使用。这将使数字人民币使用范围更广,满足没有银行账户和支付账户的部分公众使用需求,更好地发挥作为法定货币的作用和使命。

  第四,参与测试的银行一共四家。分别是中国工商银行(4.9300.020.41%)、中国农业银行(3.1800.010.32%)中国银行(3.2300.020.62%)和中国建设银行,也就是通常所说的“四大银行”。这四家银行,以后将是数字人民币主要兑换银行。当然,其他银行也可能以其他形式参与数字人民币,如和四大银行一起参与流通环节服务。

Translation :

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.

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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.

Mandarin Note:

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.

 

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