The recent Lunar New Year period saw a major push by the Chinese government to increase the usage of its central bank digital currency (CBDC), the e-CNY. Over 200 activities aimed at “promoting consumption” were launched across the country, with multiple cities giving away over 180 million yuan ($26.5 million) worth of e-CNY in the form of subsidies and consumption coupons.
The efforts by the government have been met with enthusiasm by the public, as evidenced by the highly popular e-CNY giveaways in Hangzhou. According to a report by the Global Times, the e-CNY given away by the Hangzhou city government was taken up within nine seconds, showcasing the potential of the digital currency to drive economic activity.
This success has led to the setting of ambitious targets for the future, with senior ruling party officials in Suzhou setting a tentative key performance indicator of having 2 trillion yuan ($300 billion) worth of e-CNY transactions in the city by the end of 2023. This target is ambitious, considering cumulative e-CNY transactions only crossed 100 billion yuan ($14 billion) in October, two years after the launch of the CBDC.
In an effort to attract new users and drive adoption, the e-CNY wallet app has undergone several updates to enhance its functionality. The app now allows users to send red packets, a popular tradition during the Lunar New Year, as well as make contactless payments using Android phones, even if the device is without internet or power.
Despite these efforts, the uptake of the e-CNY has been slow, with a former Chinese central banker admitting that the results of the trials have been “not ideal” with usage being “low, highly inactive.” However, the Chinese government is determined to increase the usage of the e-CNY, and the recent efforts during the Lunar New Year period serve as a clear indication of this.
The future of the digital currency in China is uncertain, but the popularity of the e-CNY giveaways suggests that there is a great deal of potential for the CBDC to drive economic activity and boost adoption. Whether the ambitious targets set by the government will be met remains to be seen, but the commitment to increasing the usage of the e-CNY is a clear sign that the digital currency has a bright future in China.