The announcement follows the successful completion of major eCNY pilot projects such as the 2022 Beijing Winter Olympics and Winter Paralympics. This will be the second expansion of the pilot area, as the bank seeks to “expand the scope of the pilot program in an orderly manner”. It will at least double the number of cities by including Tianjin, Beijing, Hebei, Chongqing, Guangzhou in Guangdong, Fuzhou and Xiamen in Fujian, and six cities in Zhejiang that will host the Asian Games.
The central bank believes that the number of users, merchants and transactions participating in the pilot has grown steadily, and the market has responded well, justifying the expansion.
Earlier this year, the central bank shared statistics showing the number of personal wallets had increased 84% during the last two months of 2021. And the total value of transactions rose to 87.565 billion yuan ($13.8 billion).
The bank has actively been engaged in experimenting with different aspects of the potential CBDC. For example, the digital yuan promotes privacy and “controllable anonymity” through its different wallet types – an “anonymous” version allows a maximum of 500 yuan ($77) per payment, a daily limit of 1,000 yuan ($154), and 10,000 yuan ($1536) per month.
However, a key question that remains is the retention rate of consumers, especially as incentives such as giveaways are phased back. Consumers may revert back to private wallets such as Alipay or Wechat pay. In the last two months of 2021, the digital yuan saw a much slower growth rate of 41%. This implies that either the transaction values have declined or there’s inactivity from many wallets created to get free money given away to trial the wallet. A primary objective of the CBDC is to ensure that users can move between WeChat and Alipay and provide redundancy in case these private platforms have an outage.
Beyond its domestic pilot projects, China has also been involved in wholesale cross border payment projects. The People’s Bank of China is working alongside the central banks of Hong Kong, Thailand, and the UAE in developing a shared DLT system to use their own CBDCs for cross border payments.