China’s digital yuan extends usage into finance scenarios

Date:


SHANGHAI, June 17 (Reuters) – China’s digital yuan can now
be used in to buy wealth management products, pay for insurance
policies, and extend bank loans, as the central bank further
expands e-CNY’s application beyond retail shopping, though still
only in pilot schemes.

The People’s Bank of China is a front-runner in developing
and issuing a central bank digital currency (CBDC), which in the
case of the e-CNY will be a traceable replacement for notes and
coins.

It used in much the same way as current Chinese digital
payment methods, with funds stored in digital wallets.

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So far the main application has been for buying consumer
goods and services in more than 20 pilot cities, but it is being
increasingly used in financial transactions.

China Construction Bank Corp now allows
customers to use e-CNY to buy wealth management products,
according to the banks’ mobile application.

Last week, a man surnamed Jiang made China’s first purchase
of automobile insurance policy using e-CNY, the official
Securities Times newspaper reported.

And Agricultural Bank of China’s
Suzhou branch extended 1.5 million ($220,000) of loans in e-CNY
to a COVID-hit concrete producer this month, according to Xinhua
Daily, another government newspaper.

China’s digital currency was used to aid the struggling
economy earlier. The southern tech hub of Shenzhen and Xiong’an
New Area in northern Hebei province doled out digital cash to
stimulate consumption in China’s pandemic-hit economy.

“In the future, digital yuan can be applied in more
scenarios such as medical treatment, education and finance,”
Zhang Ming, senior economist at the Chinese Academy of Social
Sciences, wrote in a commentary for Xuexi Shibao, a publication
of the Central Party School.

Transactions using e-CNY totalled 87.6 billion yuan at the
end of 2021, with 261 million individual e-wallets opened,
according to the central bank.

The developments “enriched application scenarios of the
e-CNY,” said Dan Wang, chief economist at Hang Seng Bank China.

“But I don’t think the scale (of those applications) would
be very large in the future,” she said. “As the e-CNY positioned
itself as M0 (currency in circulation), it’s basically another
form of cash.”
(Reporting by Jason Xue and Andrew Galbraith; Additional
reporting by Samuel Shen; Editing by Bradley Perrett)



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