Although many state Chinese workers receive their salaries in “e-CNY” CBDC aka digital yuan, survey shows they seldom have chances to use it and often convert it all to physical cash.
May 13 article by the South China Morning Post reveals that some Chinese cities have already begun paying state employees in the national Central Bank Digital Currency (CBDC) but most of the workers convert it to cash immediately, mostly due to the lack of utility for the digital payment means.
The Chinese CBDC project has been running since January 2022. At the same time, the centralised digital currency has been adopted quite slowly. The local government has launched various initiatives to boost the use of e-CNY. Thus, Chinese consumers can link their bank accounts to the CBDC app for contactless payments. China’s major social networking and payment app WeChat, as well as Alipay, has added support for payments using the digital yuan. Moreover, e-yuan CBDC can be used for cross-border payments between China and Singapore, facilitating tourist spending between the two countries.
The most recent government initiative was a pilot programme where employees of government bodies and state-owned companies receive their salaries not as a direct deposit but as a balance of digital currency in the “e-CNY” app. The first city to do so was Changshu, under the jurisdiction of Suzhou.
At the same time, the employees currently testing the new payment option lack opportunities to leverage the digital currency. Reportedly, one of the reasons state employees prefer to cash out their digital yuans is that such deposits do not accrue interest, unlike cash deposits in local banks. They cannot be used to buy certain stocks or other financial products. Besides, the workers are discouraged by not having too many online and offline stores where they can spend their CBDC directly.
Finally, many people have privacy concerns when it comes to centralised entities having control over all their money and tracing their every transaction. Although China is a practically cashless society, popular payment platforms like WeChatPay or Alipay are not under direct government control. Besides, the e-CNY app does not provide any disruptive financial innovations amid the already advanced Chinese payment landscape.
