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Digital yuan is slowly gaining popularity through new user-friendly app

The Chinese government has increased its efforts to establish a strong digital currency, by recently launching an application that users can download in 23 cities across the country. Big e-commerce players, such as Tencent and Alibaba, have announced the integration of the digital yuan (e-CNY) in their payment options.

Currently, people living in the pilot areas can freely download the app and use it as an alternative payment method. Among the 23 cities included in the program are Beijing, Shanghai, Shenzhen, Guangzhou, Chengdu, and Suzhou.

The digital yuan is a digital currency issued by China’s central bank, the People’s Bank of China (PBOC), that includes the digitization of bank notes and coins currently in circulation. It is otherwise known as the Digital Currency Electronic Payment (DCEP), the digital RMB, or the e-CNY. It is meant to be used for high-frequency small-scale retail transactions. This is not a cryptocurrency (which is banned in China).

The PBOC first tested the e-CNY app in April 2020 in four cities. This pilot program has since been expanded through invites and cash incentives to eventually reach 140 million registered users by October 2021, according to the institution.

Though the e-CNY is a direct competitor of its own payment system, Alipay, the e-commerce giant Alibaba announced the adoption of the digital yuan. Users of Alibaba’s food delivery app ele.me, grocery delivery app Hema Fresh, and e-commerce platforms Taobao and Tmall will be able to pay for orders using the e-CNY.

The Tencent-owned messaging app and payment platform WeChat also said that it would permit users to select e-CNY as a payment option. With over 1.2 billion users, of which around 750 million are active daily, this development could give significant push to the e-CNY.

However, when it comes to online payment methods, the e-CNY faces tough competition, specially against the two digital banking systems WeBank (WeChat Pay) and MyBank (AliPay). Users can download the standalone e-CNY app or use the Alipay and WeChatPay apps to manage their e-CNY transactions.

The digital yuan is distributed via a two-tier system. The PBOC transfers e-CNY to a list of approved commercial banks, including the Agricultural Bank of China; Bank of China; China Construction Bank; and Bank of Communications; among others.

Users can choose between individual digital wallets and corporate ones, where they can link different bank cards. These wallets may be software-based (through the use of apps) or hardware-based, in which case an electronic card is issued for touch-based transactions.

The digital wallet, called "shuzi qianbao" in Chinese, is an online system through which the user can track and store e-CNY. It can only be accessed through the digital yuan app.

Users can set up multiple digital wallets on the app and set parameters, such as daily spend limits and the apps and services that can be paid for with the wallet, and link different bank cards.

Foreigners are only able to access basic functions in the digital yuan app as a Chinese identity card is required for some of the ‘higher-level’ wallet options (higher spending limits). Currently, only the lowest level wallet is available for sign-up without a Chinese identity card, which has an RMB 5,000 daily and RMB 50,000 yearly spending limit.

As of October 2021, 123 million individual digital wallets and 9.2 million corporate ones have been issued, doubling in January 2022, probably due to the coverage of the e-CNY during the Beijing Winter Olympics.

Many of the 23 cities allowed to use the app, started their own promotion campaigns by releasing the digital currency to the public.

In December of 2020, Suzhou released 20 million digital yuan (U$30 million) via lottery. Winners received “red packets” via an app containing up to 200 e-CNY to be spent on JD.com, while Beijing ran a similar trial with vouchers worth 200 e-CNY to be used during 2021’s Lunar New Year Holiday.

At the moment, the digital yuan can only be used domestically. However, China plans for some international use in the future, while the PBOC has begun laying the groundwork for a cross-border central bank digital currency (CBDC).

These are the 23 cities where users are allowed to download the e-CNY app:

  1. Shenzhen, Guangdong province

  2. Guangzhou, Guangdong province

  3. Suzhou, Jiangsu province

  4. Xiong’an New Area, Hebei province

  5. Chengdu, Sichuan province

  6. Shanghai

  7. Hainan province

  8. Changsha, Hunan province

  9. Xi’an, Shaanxi province

  10. Qingdao, Shandong province

  11. Dalian, Liaoning province

  12. Beijing (Winter Olympics and Paralympics sites)

  13. Zhangjiakou, Hebei province (Winter Olympics and Paralympics sites)

  14. Tianjin

  15. Chongqing Municipality

  16. Fuzhou, Fujian province

  17. Xiamen, Fujian province

  18. Hangzhou, Zhejiang province

  19. Ningbo, Zhejiang province

  20. Wenzhou, Zhejiang province

  21. Huzhou, Zhejiang province

  22. Shaoxing, Zhejiang province

  23. Jinhua, Zhejiang province


The main goal of the digital yuan is to provide financial and legal benefits as well as optimize monetary transactions. It aims to reduce the production and storage of cash and coins not only to lower the costs, but also to accelerate the transition towards digital currencies and stimulate competition among the online payment market players.

Having a third payment system would offer an alternative in case the other payment options are shut down due to cyberattacks or any other issue, preventing the disruption of the domestic market.

In addition, the existence of the digital yuan would also provide legal benefits, such as the tracking and prevention of illegal practices (for example money laundering or terrorist financing). Unlike cash, it is difficult to counterfeit digital currencies.

More than 260 million people downloaded the e-CNY app after it was launched early this year, making it one of the most downloaded applications in China.

However, critics argue that there is no real incentive to switch to the digital yuan when other forms of digital payment (Alibaba and Tencent) are already available. For users to make payments with Alipay or WeChat, for example, all they must do is link their bank account to the app.

The digital yuan, however, requires users to use the digital yuan app or to sign up for a separate app and link it to their Alipay or WeChat. These last two systems offer fundamental advantages and a comprehensive set of services and functions that are extremely popular with users.

On the other hand, the e-CNY app offers enhanced privacy and security thanks to a series of technologies, such as digital certificates and digital signature, that will make illegal duplication, counterfeit, and transaction falsification virtually impossible.

Chinese consumers are increasingly more concern about their privacy and how big tech giants protect their data and personal information. It may be possible in the future that consumers feel more comfortable trusting the central bank rather than a tech company.

Through the e-CNY app, users will be able to transfer small sums of money to peers, such as repaying a friend for a meal or transferring money to a street vendor. Users will also be able to do this simply by touching their phones together, as the app is enabled by NFC technology.

Using the e-CNY will be similar to other online payment platforms. In its current design form, the digital yuan app lets users transfer money from their bank account to top up a digital wallet and choose which apps they would like to use the e-CNY for. Alipay and WeChat Pay also have digital wallets and enable online payments of third-party services through their apps.

The e-CNY is essentially a digital banknote and makes up a portion of the country’s overall cash supply. This means spending the e-CNY is unlike using a bank card or a digital payment platform (tied to a bank account), as the money from these sources comes directly from a savings or checking account.

In addition, as the e-CNY is technically China’s legal tender, it is illegal for any merchant to refuse this as a payment option. Merchants can, however, choose to refuse other payment options, such as WeChat Pay or Alipay.

Users can also spend the cash in their digital wallets even when not connected to the internet as the app uses NFC technology.

The e-CNY project is still in its early stages, but it will likely pick up speed under the continuous support of the government and central bank of China. To learn more about our services in China, contact our Head of Business Advisory - Ms. Kristina Koehler-Coluccia at kristina@woodburnglobal.com.






DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.


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