Payment codes for Alipay (right) and WeChat placed at a market in Shanghai on Nov. 5, 2020.
Last month, the Chinese Communist Party began a digital coin trial in Shenzhen, but it did not work well, and people are instead concerned about the Communist authorities’ easier access to real-time data on their financial lives. Experts say it will take a long time for the digital yuan to develop and that it will be difficult to get out into the world.
The media outlet interviewed seven participants in the digital yuan trial who said they had little interest in switching to the digital yuan from the mobile payment system operated by Ant Financial Services and Tencent Holdings Ltd, according to U.S. media outlet Bloomberg 10. While the interviewees offered no insight into the future role of the digital renminbi in the global foreign exchange market, their lukewarm response hints at the challenges the digital renminbi will face.
Ms. Chen, 36, works in the telecommunications industry and is one of more than 500,000 people in Shenzhen who are eligible to participate in the trial. “I’m not excited at all,” she said.
For Ms. Lin, 25, who works for a financial firm in Shenzhen, using the digital yuan is easy. But she said she has no incentive to permanently switch to using the digital renminbi, given that China’s existing digital payment methods are reliable and work seamlessly with other app-based services, from social media to e-commerce platforms.
Although merchants participating in the digital renminbi trial offered discounts of up to 10 percent, they still failed to attract Ms. Lin. Platforms run by companies such as Anthem often offer discounts for a variety of services, from taxi rides to grocery delivery.
Ms. Chen, a 33-year-old civil servant, has also shied away from digital coins out of concern for privacy. She says it’s “a little scary” that authorities could track every payment. In a country that often doesn’t comply with tax laws, some businesspeople may also be wary of having their transactions flow directly into government databases.
Zennon Kapron, founder and managing director of Shanghai-based financial consulting firm Kapronasia, said the Communist government could turn to coercive measures if the digital yuan doesn’t gain traction in the long run. In fact, it has already begun to take steps to exert more control over the data collected by financial and technology companies, including Ant Financial and Tencent. One day, Kaplan said, the government will say, “You have to use this.
Even if policymakers can’t do that, they may require merchants and Internet platform operators to add digital yuan to their payment options, said Francis Chan, a senior analyst at Bloomberg Intelligence.
As of Monday, Mybank, an online bank launched by Ant Financial Services, was listed as an option for digital yuan apps, but it was not clear if users could connect to their Alipay wallets. Weizhong Bank (Webank), China’s first online bank set up under Tencent, is also listed as an option, but is grayed out and unavailable.
According to analysts at Chen, the digital yuan will be used nationwide by the 2022 Beijing Olympics and will account for 9 percent of China’s domestic digital payments by 2025.
Convincing the world to accept the digital yuan will be more difficult. Michael Ho, head of financial services at Oliver Wyman, said the digital renminbi only solves the payments infrastructure part, but solving that one problem alone won’t solve all the problems.
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