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The Chinese digital yuan trial has gone life following the big announcement made last weekend. During the weekend, China’s southern city of Shenzhen, a major Chinese city, announced that it was giving away 10 million yuan ($2 million) in its Central Bank Digital Currency. According to them, the digital yuan can be used across 3,389 stores. The main objective of the giveaway is to encourage the usage of the new government-backed digital currency.
Close to 2 million people applied to be among the 50,000 that will be randomly selected to receive the “red packet” valued at 200 yuan (about 30 USD) on Sunday, which will be distributed across 3,800 designated shops that are capable of accepting digital yuan payment in the district of Luohu. To be eligible to receive the currency, citizens must download the official digital Renminbi app.
A statement by the Shenzhen government’s internet information office revealed that the latest trial in digital currency was aimed at stimulating consumer spending to boost China’s economic recovery from the coronavirus pandemic.
Recall in April that several cities, including Shenzhen, reportedly began a trial adoption of digital currencies into the local monetary system, including paying public servants’ salaries.
The currency currently has the backing of China’s state-run Peoples Bank of China. It is seen as part of the government’s plan for a cashless society – with digital currencies more easily monitored than paper money of cryptocurrencies.
In recent times, China has seen a surge in digital payment as a form of payment through apps run by tech firms Tencent and Alipay.
China Citic Bank International Chief economist Liao Qun thinks that this new digital renminbi giveaway will skyrocket digital currency usage to a certain extent in China. Another Chinese chief economist, Dan Wang, believes so, stating that each yuan given away is likely to generate more sales, specifying a multiplier effect.
He was quoted saying, “A back-of-the-envelope calculation would suggest that this 10-million-yuan program will generate at least 50 million yuan in total demand.”
Also, Fan Yifei, the PBOC Deputy Governor, revealed that the digital yuan, also known as the Digital Currency Electronic Payment (DCEP), has already been used in 3.13million transactions worth of almost 1.1 billion yuan. Just recently, over 5,000 medical and healthcare workers handling the Covid – 19 Pandemic was rewarded by the Shenzhen government with digital yuan.