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If the Federal Reserve still wants to prove China’s intent to challenge the dollar’s hegemony, it should look no further than the small experiment currently underway in Hong Kong.

Last month, Bank of China (Hong Kong), one of the city’s major deposit-taking institutions, withdrew over two days 500 test accounts linked to e-CNY, the electronic version of official Chinese money. Customers are each given 100 yuan in digital form, which they can spend at mainland stores, on or at the supermarket chain in Hong Kong. A modest debut underlines Beijing’s determination. even before the digital yuan could become the payment tool of choice at home, authorities are testing its capabilities in another market.

Expect trials to accelerate as e-CNY integrates with Hong Kong’s so-called Faster Payment System, a 24×7 network through which people can pay each other and pay bills instantly using mobile numbers, email addresses or QR the codes. Once that link is established, anyone with a bank account in Hong Kong should be able to make digital yuan purchases on Alibaba Group Holding Ltd.’s Tmall and Taobao sites without the fees or delays and uncertainty associated with credit card transactions. encountered when paying with local bank accounts connected to AlipayHK wallet.

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