In an effort to promote inbound travel and significantly improve foreigners’ experience in the country, the Chinese government recently updated the e-CNY digital wallet app, allowing visitors to open accounts using a Visa or Mastercard bank account.
The e-CNY digital wallet is the official app used for managing the digital form of the Renminbi – otherwise known as China’s Central Bank Digital Currency (CBDC) or the digital yuan. The e-CNY is still in the pilot phase, with no set date for a nationwide rollout, but the long-term goal is to replace the paper CNY.
New Features of the e-CNY app
In its ongoing efforts to improve the usability of the e-CNY, China introduced several new features. These updates are geared towards making the e-CNY more accessible and convenient for both local and foreign users.
The e-CNY app is readily available for IOS users through the Apple store and Android users via the China-based Google Play-like app store. This accessibility ensures that a broad spectrum of smartphone users can tap into the potential of the e-CNY.
One of the most significant recent updates to the app caters specifically to IOS users, allowing them to top up their e-CNY wallets using international cards, including Visa and Mastercard.
In addition, foreign visitors can now register on the e-CNY app using their foreign phone numbers, simplifying the process of accessing and utilizing the e-CNY.
Another major milestone in China’s digital payment landscape last year, was when WeChat Pay and Alipay (owned by tech giants Tencent and Alibaba, respectively) opened account sign-ups to anyone with a Visa or MasterCard bank account.
People visiting China’s major cities on a short-term basis can seamlessly get by in what is now a largely cashless society. Payments being restricted to residents with Chinese bank accounts was a major issue plaguing tourist, business, and academic trips.
According to a report from the South China Morning Post, as of June 2023, the e-CNY app registered 950 million transactions, at a total value of RMB 1.8 trillion (US$ 343.4 billion).
The e-CNY is a pillar of the Chinese government’s vision for a world-leading digital economy – also known as the ‘Digital China’ blueprint. As well as improving efficiency in the real economy for China’s citizens, this strategy is about accelerating China’s global influence through technological prowess.
Looking beyond the current e-CNY trial program (which now encompasses 23 cities and five provinces), China is hoping that adoption of its CBDC in cross-border transactions will one day promote the RMB overseas more broadly.
Digital Wallet
The digital wallet serves as an online repository for managing and storing e-CNY and it is accessible through the app.
Within the app, users have the flexibility to establish multiple digital wallets and configure various parameters, including daily spending limits and the eligible apps and services that can be funded using the wallet. Additionally, it allows users to link different bank cards for added convenience.
Enhanced security measures, including a digital certificate system, digital signatures, and encrypted storage, ensure that issues like double-spending, counterfeiting, transaction falsification, and repudiation are virtually impossible, according to China’s Central Bank (PBOC).
Certain “higher-level” wallet options within the e-CNY app require a Chinese identity card for access.
The e-CNY app offers additional benefits for users, such as increased privacy and security. Unlike WeChat and Alipay, which require real-name verification for transactions big and small, the e-CNY digital wallet offers relative anonymity for the lowest-level wallets as users only need a phone number to sign up.
According to analysts, the e-CNY eventually will become integrated with Alipay and WeChat due to the unparalleled convenience and market penetration of these “super apps”. The Chinese government is actively promoting this integration, as it would give the e-CNY a bigger user base.
Not a cryptocurrency
CBDCs, like the e-CNY, are different than cryptocurrencies. China banned cryptocurrency exchange operations in 2017 and transactions in 2021 due to their difficulty in regulating. Unlike cryptocurrencies that operate on decentralized blockchain technology, CBDCs are fiat currencies subject to government control and are more predictable in value due to their pegging to existing currencies.
While cryptocurrency transactions can be entirely anonymous, the digital yuan prioritizes security and traceability. It offers anonymity for small transactions but retains legal traceability for larger ones.
The e-CNY uses a variety of technologies, including digital certificate system, digital signature, and encrypted storage to make double-spending, illegal duplication and counterfeit, transaction falsification, and repudiation unfeasible, according to the PBOC.
Internationalization of digital currency
The latest updates seek to launch the internationalization of the Chinese digital currency, with the ultimate goal of elevating the Renminbi to a global reserve currency and challenging US dollar dominance.
While foreign visitors to China may not need to use the e-CNY just yet, it is set to become an important part of the country’s inbound tourism and international business interactions.
The e-CNY’s reach extends beyond China’s borders. Foreign athletes and tourists accessed it during the Beijing Winter Olympics in 2022, and it will be tested again during the 2023 Asian Games.
In Hong Kong, an e-CNY pilot explores cross-border payments, potentially strengthening the renminbi’s global role. Furthermore, internationalizing the e-CNY through the Belt and Road Initiative (BRI) and the Digital Silk Road presents opportunities to decrease reliance on the U.S. dollar in trade and financial infrastructure.
The rise of mobile payments has significantly changed the daily lives of Chinese residents. However, for foreign visitors to China, the digital transaction landscape had often presented hurdles and limitations, particularly when it comes to utilizing e-CNY in their digital wallets.
China understands the pivotal role played by foreign tourism and international business interactions and is trying to create favorable impressions and promote ongoing economic engagement with the country.
By streamlining the payment process and making it more accessible to foreigners, China not only encourages tourism but also facilitates trade and business relations.
Moving forward, the e-CNY will remain key in China’s long-term goal for a highly digitalized society and globally competitive currency. The extent of these benefits to foreigners is still untested, however, China is at the vanguard of CBDC development.
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