A small team from China Construction Bank visited Ma Fei’s snack store at a shopping centre in Suzhou city in late November, asking Ma to join a trial of China’s new digital currency. Ma, the shopkeeper, refused to join, saying he had no need nor desire to take part in the programme. A few days later, the mall’s management got involved, telling Ma that the digital yuan scheme was a government project and that he had better participate. This time, Ma, in his thirties, agreed to give it a try after being promised that his store would not have to bear any costs. Ma opened a bank account at China Construction Bank and requested an electronic wallet. A bank clerk helped him download the Digital Renminbi App onto his smartphone, ushering him into China’s burgeoning world of digitalised cash. Ma’s experience made him part of China’s largest trial of its sovereign digital currency – an initiative spearheaded by China’s central bank. The People’s Bank of China has said the digitalised yuan is meant to be a substitute for physical notes and coins, while providing citizens with a more secure and convenient means of payment. What is China’s sovereign digital currency? One uncertainty about the digital yuan’s future is whether Chinese consumers and merchants will quickly accept the digital currency on top of already ubiquitous electronic payment services such as Alipay and WeChat Pay , as it will require customers to use yet another app on their phones. Alipay is affiliated with Alibaba, which owns the South China Morning Post . Suzhou, a prosperous metropolis in eastern Jiangsu province, is one of four cities that have been designated to test the e-yuan, officially called the Digital Currency Electronics Payment (DCEP). Nearly two weeks ago, 100,000 electronic “red packets” were given away through a lottery on the city’s public services app, each containing 200 yuan (US$30) worth of e-yuan for consumers to spend at stores like Ma’s that had agreed to become part of the test programme. Red packets are gift envelopes traditionally given out during holidays and special occasions. Before Suzhou, China conducted a similar, but smaller, trial in Shenzhen . In October, the southern Chinese hi-tech hub gave away 10 million yuan (US$1.53 million) worth of the digital currency to 50,000 local citizens in its Luohu district. The Suzhou trial is twice as large. The central bank is also testing the new currency in the cities of Chengdu and Xiongan, as well as venues for the 2022 Winter Olympics. The Suzhou trial began on December 12 to coincide with the “ Double Twelve ” shopping festival, and will end on Sunday. One week after the e-yuan became available in Suzhou, shopkeeper Ma said he found the e-yuan to be a convenient way to receive and make payments. “It will become another WeChat Pay or Alipay sooner or later,” Ma predicted. Merchants can display a QR code that has been linked to their bank account, allowing customers to scan and pay. Or, merchants can use point-of-sale (POS) machines that are updated to be compatible with the e-yuan. Ma said he liked that the e-yuan app allowed for the use of a touch-and-pay option through smartphones. Payments can be made even without an internet connection. In addition, payments via e-yuan go directly into the merchant’s bank account without any fees nor commission, while WeChat Pay or Alipay charge a fee when withdrawing from the accounts, Ma said. “It’s very convenient for me … and the bank doesn’t charge a cent,” Ma said. WeChat and Alipay are wallets, while the digital yuan is the money in the wallet Mu Changchun, head of research for China’s digital currency A shop assistant at a milk tea store said that the e-yuan seemed easy to use in transactions, and she felt the experience was no different than using Alipay or WeChat Pay. Moreover, she said she expected people to use it frequently after it is rolled out in the future. “If they connect my spending in e-yuan with my score in the social credit system, we will be bound to use it,” she said. China’s central bank has played down competition between the digital currency and existing payment services. At a Shanghai forum in October, Mu Changchun , the head of the digital currency research institute under the central bank, clarified the difference between the digital yuan and payment services. “WeChat and Alipay are wallets, while the digital yuan is the money in the wallet,” Mu said. China has already become a largely cashless society thanks to services such as Alipay and WeChat Pay, which jointly account for 94 per cent of mobile payment services in the country. The trial in Suzhou shows that the digital currency wallets promoted by state banks could offer new payment choices for consumers. China moves to legalise digital yuan and ban competitors with new draft law According to one “operational guidance” document handed out to merchants in the digital yuan pilot programme, which was shown to the South China Morning Post , the lack of a fee in payment settlements was highlighted, while it noted that “there are settlement fees for Alipay and WeChat Pay accounts”. It also stressed that the e-yuan is a digitalised form of the yuan issued by the state, with the same legal status as cash. “A merchant can decline payment in Alipay or WeChat Pay, but cannot decline payment in e-yuan,” it says. In Suzhou, the e-yuan promotion and trial are being handled by the local branches of six state banks – the Industrial and Commercial Bank of China, Bank of Communications, China Construction Bank, the Agricultural Bank of China, Bank of China and the Postal Savings Bank of China. “The digital renminbi system installation is being carried out only by large state-owned commercial banks,” the document says, adding that they will provide all of the necessary support to help merchants utilise the e-yuan payment system. At the Xiangcheng Fanhua Centre, another mall in Suzhou, there are several banners on each floor promoting the digital yuan and e-yuan wallet apps. Signs welcoming use of the e-yuan are posted at every store. The owner of an electronics shop at the mall, surnamed Cao, said that he received the notice about the DCEP test in early October, and promotional activities heated up in November. Cao said the mall has a unified settlement system for e-yuan, so he did not have to open a new bank account to start the service. Cao said he was initially excited about the novelty of using the e-yuan to collect payments, but now it seemed as routine as any other payment method. “You pay your money, I take your money,” he said. “We only need to see the money hit our account.” The promotion of the e-yuan through the persuasion of merchants, coupled with the distribution of red packets to consumers, is a combination of proven tactics used by Alibaba and Tencent. Alibaba had hired an army of people to persuade and convince small merchants across the country to use Alipay, while WeChat Pay took off among Chinese consumers after a distribution campaign of red packets during the Lunar New Year holiday in 2014. And the digital currency push has another thing going for it: the clear support of the government. All of the merchants and consumers the Post talked to in Suzhou knew that the e-yuan initiative is backed by the state. Another highlight of Suzhou’s e-yuan trial is the ability to use it for online shopping. China’s second-biggest online mall, JD.com, was chosen as a partner . Li Lan, a Suzhou resident who won a 200-yuan red packet through the lottery system, said she purchased a pair of sports shoes on JD.com right after receiving the digital yuan. She wanted to quickly use the money because she knew it would be “collected back” after the trial ends on Sunday. [The Suzhou trial] also looks like a test of the model of mobile phone you have Li Lan, Suzhou resident Other restrictions imposed in the trial include the inability to withdraw cash from the e-yuan account, and the balance cannot be transferred to a personal bank account. This forces recipients to spend the money at JD.com or at about 10,000 retailers in the city during the trial period. Li said the process of registering for and installing the electronic wallet was easy, with only a mobile phone number required. She did not even need to input her bank account number, as it connected to her account automatically. “I’m comfortable with the product developed by the state,” Li said. “There will be no problems with safety.” Li said that she was pleased that the money she won was available for online shopping, “and 200 yuan is still a considerable figure”. Her husband had also won one of the virtual red packet, and he was considering putting the money toward a new smartphone, because his current one is getting old. Given the need for a relatively new phone to run the e-yuan app, Li joked that the Suzhou trial “also looks like a test of the model of mobile phone you have”. Inside China Tech: Digital yuan to bolster mobile payments in China These types of relatively small-scale trials also serve to work out the kinks and bugs before a mass roll-out – the timeline for which has not yet been formally announced. A few merchants told the Post that there were still technical issues with e-yuan payments. One saleswoman at a food stall in the Gusu district of Suzhou said she was unable to receive real-time confirmation that a payment had been received, because she had no device on hand to access that information. State banks are reminding merchants that the e-yuan is still in a trial period, and that they should be mindful of “confidential matters”, according to the handouts that merchants showed to the Post . The Digital Renminbi App has a feature disabling a smartphone’s screenshot function, making it more difficult for consumers to show others the interface for now. According to the interfaces shown to the Post by a number of consumers, China’s digital currency app is still quite basic in its design, compared with services on Alipay and WeChat Pay. But banks are expected to be able to develop add-on services for the digital yuan app later. For now, clicking the “More” option on the upper-right corner of the DCEP wallet’s front page reveals just three services. And the service under a hammer-and-sickle symbol allows members of the country’s Communist Party to pay their membership fee to the ruling party with the digital yuan.