Six of the largest state banks in China are reportedly promoting e-CNY, the country’s ‘digital yuan,’ ahead of an online shopping festival on May 5th. The banks are specifically promoting the central bank digital currency (CBDC) as a preferential means of payment above AliPay and WeChat, according to Reuters.
Reuters specifically said that in this way, customers would “[bypass] the ubiquitous payment plumbing laid by tech giants Ant Group, an affiliate of Alibaba 9988.HK and Tencent 0700.HK.”
An anonymous official involved in the launch of the e-CNY said that: “people will realise that digital yuan payment is so convenient that I don’t have to rely on Alipay or WeChat Pay anymore.” The banks involved in the latest e-CNY try to include a number of the country’s largest lending institutions: the Industrial and Commercial Bank of China, the Agricultural Bank of China, Bank of China, HSBC and the China Construction Bank.
China’s Public Banking Infrastructure Appears to Be Taking Power Back from Private Tech Companies
Indeed, it appears that the Chinese government is using the digital yuan as a way to reclaim the country’s financial infrastructure from private companies.
CoinTelegraph reported in late March that Mu Changchun, the Head of the digital currency research institute at the People’s Bank of China (PBoC), told an online panel discussion that Alipay and WeChat Pay make up 98% of the mobile payment market in China.
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While Changchun explained that it is not exactly PBoC’s intention to compete with the private payment providers, the fact that the payments infrastructure is so centralized between them could pose a risk to the financial system.
However, PBoC’s takeover of the country’s financial infrastructure could also be a part of widespread efforts to decrease the power of tech giants in the country. The New York Times reported in April that the Chinese government slapped a $2.8 billion fine on Alibaba for anti-competitive behavior.
Additionally, the government may be aiming toward wresting control of the massive amount of data that payments giants collect on their users. Another anonymous banking official told Reuters that: “Big data is wealth. Whoever owns data thrives. WeChat Pay and Alipay own an ocean of data.”
e-CNY Testing Programs Continue
The use of the e-CNY in the online shopping festival is only the latest in a number of testing programs that China has launched throughout the country over the past year.
Most recently, the digital yuan was tested by a select number of Hong Kong residents who used the CBDC to make payments across borders.
In March of 2021, online retail giant JD.com became the first online platform to accept the country’s digital currency. During a testing pilot program that month, a total of 20 million yuan ( worth nearly $3 million) was up for grabs in a lottery organized by JD.com’s fintech arm. Previously, e-CNY pilot programs were launched in Shenzhen, Suzhou and a number of other cities.