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GBAFriday, November 6, 2020 FOCUS KONG EDITION | DAILY Saying, paying it digitally

Central banks worldwide are speeding up the use of digital currencies to overhaul the international settlement system. The Chinese mainland has also made substantial progress in introducing the digital to help drive its economic reforms. Chai Hua reports from Shenzhen.

he world is fast going digital, had also transferred funds from creeping into every sector their personal bank accounts after of economic and social life. spending all the money on their “red But can we cope with such envelopes”. Self-transferred funds Scan to watch anT expeditious transformation? The reached 900,000 yuan. the video answer, according to those in the Shenzhen’s pilot program is know, is a resounding “yes”. significant in the digital yuan’s Sovereign , issued development, indicating the by central banks, is the latest to come trial has moved from closed to under the spotlight. It’s a new variant open tests, said economist Song of money distinct from Qinghui. The central bank physical or a reserve account. (PBOC) had set up a fi ntech It’s a new arena for global financial subsidiary in the city two powerhouses to restructure the years ago. international settlement system, where The payment payment is held as an “irrevocable and experience is similar to unconditional transfer” of money from that of ’s WeChat the payer to the recipient. Pay and Alibaba According to a survey by the Group’s , which Switzerland-based Bank for have long dominated International Settlements, 80 percent the Chinese mainland’s of the world’s central banks are already online payments engaged in work related to digital market, but Song currencies. It said about 10 percent pointed out they of them have started pilot projects, are fundamentally Hong Kong at the front while 40 percent have progressed from di¡ erent. conceptual research to experiments or The digital yuan is proof of concept. a kind of legal tender China has had a digital yuan rollout and the platform in driving digital yuan in four cities. According to the People’s or stores can’t Bank of China, there have been trace consumers’ By LUO WEITENG in Hong Kong Chen believes a more compelling story more than four million transactions personal spending data, [email protected] comes from the digital yuan’s capability to involving about two billion yuan ($299 he explained. essentially connect Hong Kong life with that million) in the digital currency to date. Shu Tao, professor of fi nance The visionary digital yuan project offers in mainland cities, adding fl esh to the bones In the United States, the Digital at The Chinese University of Hong The Central Committee of the potentially huge opportunities for those with for the “living circle” in the Bay Area. “It acts Dollar Foundation initiated the Digital Kong, Shenzhen, and associate Communist Party of China and the the foresight to jump on the bandwagon. as a lever to expedite deeper integration of the Dollar Project in May to explore design director of the Shenzhen Finance State Council last month unveiled Those on the trail could include Hong Kong, Bay Area,” he said. options and approaches for the digital Institute, said it’s the digital version a five-year plan to implement pilot which has the best of both worlds and will Au King-lun, executive director of the Finan- dollar. One of its main aims is to of China’s physical currency, but reform projects in Shenzhen to turn it continue to be at the forefront of promoting cial Services Development Council, said Hong “support the USD as the world’s reserve AliPay and WeChat Pay are still the into a model socialist city with Chinese the yuan’s internationalization, experts said. Kong is well positioned to become a “sandbox” currency”. payment channels. characteristics. The plan vows to “A currency’s internationalization cannot for the digital yuan. He said the payment function establish a fi ntech innovation platform be possible without an international fi nancial As China further opens up its fi nancial mar- Pilot program in Shenzhen is overlapped and competition is in Shenzhen to promote the application center playing a part. Hong Kong has what it ket and reduces its reliance on the US dollar, In Shenzhen, the country’s trial with unavoidable. One of the digital yuan’s and international cooperation in the takes to be the fi rst stop outside the Chinese the yuan, which earned nominal international its sovereign digital currency came in strengths is that no extra platform use of the digital currency. mainland testing the digital yuan’s potential,” currency status at the International Monetary the form of a large-scale digital yuan fee or interest is charged for users Slated as the “new engine” in the said Fielding Chen Shiyuan, Hong Kong-based Fund in 2016, will gain prominence. test to pave the way for international and businesses, he said. Third-party development of the - senior vice-president at China Construction Morgan Stanley has painted a rosy pic- cooperation in the use of the digital payment platforms usually demand a Hong Kong-Macao Greater Bay Area Bank (Asia) Corp. ture for the yuan’s future, predicting it could currency. fee of about 0.6 percent from stores and being close to the two special As the largest o¡ shore yuan center, Hong account for up to 10 percent of global foreign The pilot program, involving tens and service providers and about 0.1 administrative regions, Shenzhen is Kong has a pool of more than 670 billion yuan exchange reserve assets by 2030 and become of thousands of ordinary consumers percent for large people-to-people poised to take the lead in launching ($99.8 billion) although most of it is illiquid. the No 3 global currency after the greenback in mid-October, gave the public a fund transfers. cross-boundary trial programs for the “For the time being, o¡ shore yuan in Hong and the euro. close look at the digital currency. Zhu Guanming, a restaurant digital yuan, said Shu. But he said it Kong is mostly used in fi nancial investment Though China’s share of global GDP is pro- About 10 million yuan ($1.49 million) owner in Shenzhen’s Luohu district, will still depend on the progress of and restricted to stores, companies and banks. jected to hit 18.56 percent by yearend, the in digital was distributed welcomed the new payment mode. renminbi internationalization and a The digital yuan may expand the use of the cur- share of renminbi in global reserve hovers at to 50,000 users in the form of “red “I certainly prefer to use the digital long testing period is likely. rency to more scenarios in people’s daily lives, 2 percent currently. The yuan is now the sixth envelopes”. currency to save platform fees.” The PBOC began research on a o¡ ering a solution to a lack of liquidity and most used currency in international payments About two million Shenzhen Another advantage is that it sovereign digital currency as early inadequate use of yuan in the city,” said Chen. and is used to settle about 20 percent of China’s residents applied for the “lucky draw”. can boost transaction efficiency. as 2014. So far, Shenzhen, , “Hong Kong boasts a well-established fi nan- trade, according to the IMF. The winners were thrilled not only Manager Yi Zhaoxia at a bookstore and Xiongan New Area in cial market infrastructure and e-banking sys- The Basel-based Bank for International Set- by the fi nancial bonus but also the in Shenzhen said the monetary value Hebei province have been approved tem suited for digital currency transactions tlements said the yuan’s share of international privilege of trying out the new money of sales is deposited directly into the for internal tests, along with pilot without causing too much of an issue,” said currency transactions last year was just 4.3 per- form at more than 3,000 stores. store’s bank account and there is no implementations during the 2022 Herbert Yum, research manager at market cent, compared to 88 percent for the US dollar. Liu Haoliang said he was very need to use a separate third-party Winter Olympics. research provider Euromonitor International. Hui said the imbalance between the coun- excited to have been chosen because account. PBOC Deputy Governor Fan Yifei According to Euromonitor, Hong Kong cash try’s double-digit share of global GDP and the he was keen to see what a digital yuan However, Shu reckoned that told a recent forum that 113,300 private transactions have accounted for 17 percent of yuan’s single-digit share of international trans- looks like and wanted to try it out. customers’ choices will dominate the and 8,859 corporate “digital currency the city’s total consumer transactions this year actions calls for more e¡ orts to widen its use. “I shared a screenshot of the notice future of the payment structure. As the wallets” have been opened as of August. — down 6 percent from 2017. The digital yuan pilot project, together with with my friends as soon as I received existing channels have almost covered At the same time, more than “The rapid development of cashless transac- the newly-launched Wealth Management Con- it,” he said. all consumption scenarios, the digital 6,700 trial scenarios have been tions in Hong Kong is expected to reduce the nect, which guarantees mutual access to wealth Liu showed that in the e-wallet yuan needs to make breakthroughs for launched nationwide in almost all potential e¡ ect the digital yuan will have on the management products issued in the Bay Area “digital renminbi” application, the broader acceptance. fields related to people’s livelihood, city as consumers are already used to digital and facilitates cross-boundary investments virtual image of the new form looks He believes Shenzhen’s successful such as payments for water, gas and transactions,” said Yum. by individual residents in the region, will cer- like a 100-yuan note and he could experience is su¥ cient to be expanded electricity bills, government services “However, since the is the tainly help tackle the shortage of o¡ shore yuan- swipe up to pay or down to receive to other major mainland cities, given and transportation. main currency used locally, it’s extremely chal- denominated assets and take the yuan a step money. the city’s enormous economic volume lenging for the digital yuan to be widely used closer to becoming a global currency, Au said. Users could pay using the QR code and role as a national model for Contact the writer at in the consumer segment,” he reckoned. “The In the long run, how the digital yuan will or placing their phone close to the market-driven economic reforms. [email protected] long-existing dual currency credit card avail- make a di¡ erence in Hong Kong hinges on sale machine. Neither the payer able in Hong Kong and the launch of AliPay how the local currency positions itself, Chen nor the receiver needs an internet HK and WeChat Pay HK that allow users to use said. He believes the escalating geopolitical connection to execute payment. Hong Kong credit cards to pay for goods and storms and foreign sanctions highlight the sig- If winners chose to continue using services in the SAR and Shenzhen o¡ er little nifi cance of currency diversity and a comple- the app, they could transfer money room for Hong Kong people to engage in more mentary money system, which is crucial to the from the Big Four State-owned banks frequent digital yuan transactions.” SAR’s status as a leading world fi nancial center. — the Industrial and Commercial Hong Kong Secretary for Financial Services “The digital yuan can help Hong Kong trans- Bank of China, Agricultural Bank of and the Treasury Christopher Hui Ching-yu form its monetary system, from the Hong Kong China, Bank of China and China Con- A notice in said the city is most interested in wholesale and dollar’s 37-year-old peg to the greenback, to a a Shenzhen struction Bank — but a bank account cross-boundary digital currency use. basket of currencies,” he said. restaurant informs is not a must for setting up a digital “If the digital currency developed by the “Regulators should not hesitate to press customers that yuan account. they can use digital People’s Bank of China can be used for cross- ahead with new things. Indeed, they should Between Oct 12 and 18, more than renminbi to pay for boundary payment, it will further promote speed up, especially with the dust likely to 62,000 transactions in digital yuan their meals. mutual connectivity between the mainland settle soon following the US presidential elec- had been performed. Many users CHAI HUA / CHINA DAILY and Hong Kong,” he said. tion.”