By Michael Scott
The low e-CNY transactions reveal the worrying performance of China’s digital Yuan. The review by Xie Ping, a retired official in the People’s Bank of China, lamented the underperformance of e-CNY, with only $14 billion realized in the two years.
Digital Yuan Dismal Performance
Xie Ping portrayed disappointment in the slow uptake of e-Yuan despite the commitment by China’s government to expedite its usage. He noted that the digital currency has only realized 100 billion yuan, thereby a dismal performance since its introduction in October 2020.
In his address during a recent Tsinghua University conference, Ping criticized the slow progress in central bank digital currency (CBDC) uptake in the world’s most populous country. The public comment by the finance professor on December 28 lamented the inactivity, noting that such an outcome was not ideal.
Ping noted that the digital Yuan performed contrary to expectations, particularly given the government’s efforts to scale trials and introduce additional attractive features into the wallet. Recently, the e-CNY wallet included the capability to send digital-based red packets and letters to attract more users by leveraging the prevalent custom in the Chinese New year festivities.
Preference for Mobile-based Transactions
Ping’s statement echoed an earlier report by PBOC indicating low usage, as only 261 million users installed the e-CNY wallet. On the contrary, UnionPay reported that an estimated 903.6 million individuals execute mobile transactions in china.
The former head of PBOC research proposed adjustment of e-CNY from its current setup as a cash substitute to accommodate other uses. In particular, Ping noted that adjusting it to handle payments for financial products and linking it to other payment platforms would increase its adoption.
Compatibility of Digital Yuan to Daily Needs
Ping decried that digital Yuan performed poorly compared to third-party payment platforms, including Alipay, QQ Wallet and WeChat Pay, which facilitate investments and lending. He lauded their positioning to address daily consumption needs.
Ping lamented that despite third-party applications compatible with the digital Yuan, e-CNY is yet to shake off the low utilization as individuals are reluctant to embrace change.
Ping’s criticism of the government-led initiative is surprising for a former official. Nonetheless, it signals China’s needy situation for its CBDC to gain traction in a country projected to have immense potential.
The low usage is a worrying performance as the government announced the availability of e-CNY trials in four cities following the addition of Guangdong.
Editorial credit: Ladda Tonglo/ Shutterstock.com