Other BriefingsChina’s Digital Yuan App Gets a Boost: New Features Enhance Convenience for Foreign Users
China has added a new function allowing foreigners to top-up the money in their e-CNY wallets before making payments, improving their experience with the digital yuan payment services.
China has taken steps to enhance the safety and convenience of its digital yuan (e-CNY) payment service for foreigners by introducing several new features on the digital yuan app (e-CNY app).
Rolled out on September 22, 2023, the latest update brings a host of improvements, allowing foreigners in China to top up their digital yuan wallet (e-CNY wallet) before conducting transactions.
New features enabling foreigners to use the e-CNY app
In its ongoing efforts to improve the usability of the e-CNY, China has introduced several noteworthy features on the e-CNY app (which is currently in its pilot stages). 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 easily register on the e-CNY app using their foreign phone numbers, simplifying the process of accessing and utilizing the e-CNY.
How does the digital wallet work within the e-CNY app?
The digital wallet (数字钱包, shuzi qianbao) serves as an online repository for managing and storing e-CNY. Accessible through the e-CNY app (数字人民币, shuzi renminbi), this wallet is the primary tool for users to engage with e-CNY.
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.
It’s important to note that certain “higher-level” wallet options within the e-CNY app necessitate a Chinese identity card for access.
What is the e-CNY?
China’s e-CNY stands as a central bank digital currency (CBDC) issued by the People’s Bank of China (PBOC). Importantly, it shares the same value as the standard renminbi (RMB), making it a legal tender and a digitized equivalent of physical RMB. CBDCs, such as the digital yuan, offer faster, more cost-effective, and theoretically more secure transactions compared to conventional methods like e-payments or e-banking.
The mechanism behind CBDCs operates akin to withdrawing cash from an ATM, enabling instantaneous and lower-cost transactions since intermediaries, such as banks, aren’t necessary in the process. 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 a PBOC White Paper.
While the e-CNY is still in its pilot phases, primarily in major coastal cities, it’s progressing towards an official launch nationwide.
It is, however, important to note that CBDCs, like the e-CNY, are distinct from 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. In this regard, a document released by the PBOC in July 2021 describes how 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”.
China was among the first major economies to test a CBDC, starting pilot programs in April 2020. Initially rolled out in just four cities, the e-CNY trial program has since expanded to encompass fifteen provinces and twenty-three cities, including megacities like Chongqing and Guangzhou. China’s top five largest cities now offer the e-CNY, making it accessible to a combined population of 98 million people. The e-CNY’s introduction is also strategically timed with the 2023 Asian Games in Zhejiang province, allowing testing with international attendees.
Adoption of the e-CNY beyond China
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.
While these are options on the table, China has no immediate plans to promote the e-CNY along the BRI, as stated by PBOC President Yi Gang in October 2021. Nonetheless, the e-CNY’s evolution continues, offering a glimpse into the future of digital currencies.
More accessibility for foreigners in China
The rise of mobile payments has brought about a revolution in the daily lives of Chinese residents. However, for foreign visitors to China, the digital transaction landscape has often presented hurdles and limitations, particularly when it comes to utilizing e-CNY in their digital wallets.
Understanding the pivotal role played by foreign tourism and international business interactions, China has proactively addressed these challenges. The objective extends beyond mere convenience; it’s a strategic endeavor 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 collaborations. This endeavor further cements China’s position as a global economic powerhouse and underscores the role of the digital yuan as a catalyst for international economic interactions.
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China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
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