China’s ambitious e-CNY plan faces a giant hurdle: winning over 1 billion consumers at home
- More than three years after China’s central bank started digital currency trials, adoption in one of the initial test beds, Suzhou, remains lethargic
- Suzhou data show that 130 million yuan in e-CNY were used to settle various utility bills and charges for livelihood services in 2022
Alipay and WeChat Pay each have hundred of millions of daily active users on the mainland after amassing millions of features over the years between them. The two super apps each offer a myriad of services, from retailing and catering to medical services, that ensure convenience in their respective ecosystems to keep subscribers from looking to engage with other platforms. The e-CNY, in effect, became a one-time giveaway that offered consumers neither additional convenience nor any compelling reason to be regular users.
Before the Post inquired, a drink shop employee at the Suzhou mall surnamed Wang said she had not encountered a single person who wanted to use e-CNY at the store since it enabled this payment function last year. “You’re the first one to propose to use e-CNY,” Wang said.
Still, some stores have processed e-CNY payments. Meng Tao, who worked at another shop in the mall, said the frequency of customers using e-CNY was about “once a month” since their establishment started accepting it last year.
The lacklustre e-CNY usage discerned at the mall is in stark contrast with Suzhou’s ambitious target this year. Local authorities expect the total amount of e-CNY transactions in the city to reach 2 trillion yuan (US$291 billion) by the end of 2023, a big jump from the 340 billion yuan turnover recorded last year. That target amount is also close to the city’s total gross domestic product (GDP) of 2.4 trillion yuan in 2022.
That lofty goal appears to be backed by Suzhou’s efforts to increase e-CNY adoption. The city had 30.5 million personal e-CNY digital wallets, more than 900,000 places to use the sovereign digital currency and support by nearly half-a-million merchants at the end of 2022, according to official data from the local government. Local authorities have also spent more than 40 billion yuan worth of e-CNY as part of the city’s annual financial expenditure, including for salaries, tax payments and housing fund loans.
Charlotte He, a 27-year-old resident in Suzhou, said she felt excited at the time for being one of the selected e-CNY red packet recipients in the city, which had a population of 12.7 million in 2021. She remembered spending 200 yuan at a local supermarket the day after receiving the giveaway. That experience, however, was He’s sole memory of using e-CNY in the past three years.
She acknowledged that using e-CNY provided “a sense of security” because it was developed and backed by the state, instead of a private company such as Tencent or Alibaba. Still, she said the sovereign digital currency has not been a preferred payment option in the city because there was little support from local merchants.
Such feedback from He, as well as from other consumers and merchants, has not discouraged Suzhou authorities from finding more ways to promote e-CNY usage. After getting the digital yuan adopted by banks and utilities, Suzhou enabled e-CNY payment at one of its metro rail lines in June 2021. This was later expanded to all five of the city’s metro lines.
That initiative, however, was poorly received. Zhu indicated that no more than 10 per cent of local businesses have opened e-CNY wallets. If the CCB can provide more incentives, such as lower borrowing costs, interest in e-CNY wallets could be much higher, according to Zhu.
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In Suzhou, 2022 statistics from the municipal government show that 130 million yuan in e-CNY were used to settle water, electricity and gas bills, as well as charges for various livelihood services during the year. About 1.1 million e-CNY transactions were recorded in transport-related scenarios such as subway and petrol stations. On the enterprise side, more than 12 per cent of corporate transactions by SOEs used e-CNY in the same period.
The southern tech hub of Shenzhen, meanwhile, spent 570 million yuan last year on 73 consumer-targeted e-CNY campaigns. The city recorded 37.7 billion yuan in accumulated e-CNY transaction value at the end of 2022, according to data from the PBOC branch in Shenzhen.
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A mass roll-out could not be rushed because of efforts to advance the revision of laws and regulations, such as the Law on the People’s Bank of China. The PBOC is looking to formulate relevant administrative measures to enhance personal information protection, while improving the rule book and technical codes of the e-CNY.
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“I think it’s natural that e-CNY was used at a low frequency,” said Wang Pengbo, a senior financial analyst at market consultancy Botong Analysys. “It’s hard to conduct a high frequency of transactions because consumers already adopted [other payment methods].”
“After promoting the digital yuan to consumers by rolling out subsidies and red packets, the next stage of the trial should aim to make both consumers and enterprises use it voluntarily,” Wang said.
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Suzhou’s fiscal revenue rose just 0.1 per cent year on year to 233 billion yuan last year, compared with a 9 per cent growth in the same period in 2021. The city’s GDP grew just 2 per cent in 2022.
Despite Suzhou’s recent economic difficulties, some still see a way for the city to substantially grow e-CNY adoption and reach its goal of 2 trillion yuan transactions this year.
“As long as the government is pushing hard enough, it’s not impossible to reach that target,” Zhu of CCB said. “But for consumers, it won’t make any difference.”
Michelle Feng, a government employee in Suzhou, said she was asked by authorities last October to open an e-CNY wallet, where her salary and bonuses have since been deposited. Feng receives more than 10,000 yuan in the form of e-CNY each month, but said she has never used it to pay for anything.
Every time that money was received, Feng transfers the whole amount to her bank account and uses it via Alipay and WeChat Pay. She asked: “Why should I bother to download another app and use e-CNY when I’m already so used to Alipay and WeChat Pay for many years?”