China needs big tech support for digital currency plan
GlobalData Thematic Research
27th April 2021 (Last Updated April 27th, 2021 16:01)
While nothing new, digital currencies have gained significant traction over the last few years. Since 2014, the Chinese government has been working with state banks to create a digital currency.
This new digital Yuan will form an integral part of the governments’ effort to assert its dominance globally and rival the US Dollar as the reserve currency. Indeed, for this project to be successful, the government will need to have complete control over the economy and the private sector – including big tech companies.
Big tech cooperation may not be as voluntary as it first appears
The government has enlisted the help of JD.com and many other companies in the countries booming tech sector. JD.com, one of the nation’s largest online retailers, has recently announced that it will pay some of its employees using digital currency. Aside from JD.com, ride-hailing app Didi, online to offline service platform Meituan, and video streaming platform Bilibili have all begun to accept the digital Yuan for customer purchases.
It was also reported that both Ant Group and Tencent have been working with the Peoples Bank of China (PBoC) to design, develop, and test the the currency.
At present, Alipay and WeChat Pay control 94% of China’s online payment market and the data that comes with it. A new digital currency will certainly make a dent in this dominant position. According to a Reuters article, in public, the People’s Bank of China (PBoC) says a digital Yuan won’t compete with AliPay or WeChat Pay and serves only as a “backup” or “redundancy”.
However, in private, state banks marketing the digital fiat currency for the central bank describe Beijing’s intent to undercut the duo’s dominance. Transactions made in digital Yuan can be completed directly on the banks’ digital wallet, thus bypassing the need for Alibaba and Tencent’s payment services.
It’s no coincidence that this coincides with Beijing’s numerous moves to clamp down on Chinese big tech’s anticompetitive behavior which included hefty fines and blocked IPO’s.
China’s e-commerce giant JD.com starts paying some staff in digital yuan
Rita Liao 6 days
China’s plan to introduce its digital currency is getting a lot of help from its tech conglomerates. JD.com, a major Chinese online retailer that competes with Alibaba, said Monday that it has started paying some staff in digital yuan (since January), the virtual version of the country’s physical currency.
China has been busy experimenting with digital currency over the past few months. In October, Shenzhen, a southern city known for its progressive economic policies, doled out 10 million yuan worth of digital currency to 500,000 residents, who could then use the money to shop at certain online and offline retailers.
Several other large Chinese cities have followed Shenzhen’s suit. The residents in these regions must apply through selected banks to start receiving and paying by digital yuan.
The electronic yuan initiative is a collective effort involving China’s regulators, commercial banks and technology solution providers. At first glance, the scheme still mimics how physical yuan is circulating at the moment; under the direction of the central bank, the six major commercial banks in China, including ICBC, distribute the digital yuan to smaller banks and a web of tech solution providers, which could help bring more use cases to the new electronic money.
For example, JD.com partnered with the Industrial and Commercial Bank of China (ICBC) to deposit the digital income. The online retailer has become one of the first organizations in China to pay wages in electronic yuan; in August, some government workers in the eastern city of Suzhou also began getting paid in the digital money.
Across the board, China’s major tech companies have actively participated in the buildout of the digital yuan ecosystem, which will help the central government better track money flows.
Aside from JD.com, video streaming platform Bilibili, on-demand services provider Meituan and ride-hailing app Didi have also begun accepting digital yuan for user purchases. Gaming and social networking giant Tencent became one of the “digital yuan operators” and will take part in the design, R&D and operational work of the electronic money. Jack Ma’s Ant Group, which is undergoing a major overhaul following a stalled IPO, has also joined hands with the central bank to work on building out the infrastructure to move money digitally. Huawei, the telecom equipment titan debuted a wallet on one of its smartphone models that allows users to spend digital yuan instantaneously even if the device is offline.