China's Digital Yuan Experiment Met with Scepticism
A trial giveaway of digital yuan has been met with enthusiasm from currency analysts, but scepticism from actual users, who are happy with their existing payment options.
The week-long experiment saw the People’s Bank of China give away 200 yuan each ($30/€25) to 50,000 individuals, chosen by lottery, in digital ‘red envelopes’ that evoke the traditional Chinese method of gifting cash. The online wallet did not need to be linked to a bank account, and enabled payments via smartphone in downtown shops across Shenzhen: a city known for its popular shopping destinations.
The potential benefits of digital yuan would be facilitating more targeted monetary policies and paving the way for negative interest rates. Cash is a considerable obstacle to the latter, since people could withdraw and hold it privately without having to pay interest to banks. Digital cash would not offer the same flexibility. Additionally, it would introduce concerns over privacy since every transaction would be fully trackable.
Intended to launch the digital yuan from the realm of theory into real world use, the main reasons given for not wanting to use it were convenience and security. Digital payment methods such as Alipay and WeChat Pay are already well established across China, with the government keen to incentivise cashless payments, despite concerns raised in some quarters that a cashless society could risk disenfranchising rural communities, poor and disabled people, and those at higher risk of succumbing to scammers. While many shoppers are quite prepared to pay digitally, it seems more work may be needed on the digital yuan to convince people to use it over other, more familiar options.
I’m not planning on using [digital yuan] again… Unless there is another red envelope, of course.