A former official of the People’s Bank of China (PBOC), the country’s central bank, has expressed disappointment that China’s digital yuan is underutilized.
Xi Ping, former research director of the PBOC and current professor of finance at Tsinghua University, made critical public comments about the Chinese central bank’s digital currency (CBDC) at a recent university conference, according to a Dec. 28 Caixin report.
Xie noted that cumulative digital yuan transactions exceeded $14 billion (100 billion yuan) in October alone, two years after its launch. “The results are not ideal,” he said, adding that “usage has been low, very inactive.”
Despite the government’s rapid expansion of trials and new wallet features to attract users, a January PBOC report said only 261 million users had set up an e-CNY wallet.
This compares to an estimated 903.6 million people using mobile payments in China, according to China UnionPay’s 2021 report.
The former central banker said the use case for e-CNY “must change” from its current use as a substitute for cash and open up to other uses, such as being able to pay for financial products or connecting more payment platforms to drive adoption.
He compared the digital yuan to other third-party payment systems in the country, such as WeChat Pay, Alipay and QQ Wallet, which allow for investments, loans or credits. He said they have “created a payment market structure that meets the needs of everyday consumption”.
Some third-party financial apps are compatible with e-CNY, but there is little use because Xie said “people are used” to using the original service and switching is “difficult”.
Such criticism of Chinese government initiatives is rare from former officials and signals that the country may struggle to gain traction on its CBDC initiative.
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The government quickly expanded e-CNY routes to four new cities last December. It previously expanded in September to Guangdong province, its most populous, and three other provinces.
New features have been added to the e-CNY wallet app to attract users in time for Chinese New Year, which has added functionality to send digital versions of the traditional red packets or red envelopes (hongbao) that contain money during the festivities.
