The government of China is looking for innovative ways to trigger increased usage for its central bank digital currency (CBDC), opting to dole out millions to lure in citizens.
Local news outlet Global Times reported that regional Chinese governments have handed out over 180 million yuan ($26.5 million) during the Chinese Lunar New Year. The aim of the municipal governments’ giveaways is to “promote consumption” amongst citizens after lifting the COVID-19 restrictions.
Jinan and Lianyungang, cities in the provinces of Shandong and Jiangsu, reportedly issued digital yuan coupons running into millions of dollars during the holidays. Other governments used the CBDC to subsidize different sectors of their economies, with Shenzhen opting to use 100 million yuan ($14.7 million) to subsidize the catering industry.
The city of Hangzhou reportedly gave each citizen a $12 digital yuan voucher, with the total expenditure running northward of $4 million.
Global Times says that over 200 activities designed to incentivize CBDC usage were introduced during the holiday season, with corporate entities contributing their fair share. Meituan, a Chinese e-commerce platform, noted that the digital yuan offered to citizens through the provincial government was snapped in under 10 seconds by users.
As the digital yuan inches towards a full-scale launch, some officials have expressed disappointment with the metric, saying that “usage has been low” and “highly inactive.” Within months of the trials, the People’s Bank of China (PBoC) noted that transaction volumes had surged past $10 billion, but over the last few months, enthusiasm for the CBDC appears to be waning.
The PBoC, in its annual report on currency circulation, confirmed that there was $13.61 billion worth of digital yuan in circulation which made up only 0.13% of the total funds in the country. Although the figures were less than 1%, its inclusion in the report clearly shows that the PBoC anticipates the digital yuan to play an essential role in the Chinese financial system.
Attempts to spike the figures
Aware of the need to increase the metrics around the digital yuan, the Chinese central bank has taken several pre-emptive decisions. The first is the steady expansion of the cities participating in the pilot project, followed by the introduction of milestones for regional governments to boost adoption.
Furthermore, the PBoC also introduced features like the “red packet” which is synonymous with the Chinese New Year celebration into the digital yuan app. Other include the deployment of the CBDC in securities trading and experimentations with contactless payments.
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