The Chinese authorities will reportedly give away 30 million yuan ($4.5 million) in e-CNY to Shenzhen’s residents on Monday in a bid to boost its pandemic-hit economy. The latest endeavor has also shown that China continues to push its CBDC and promote the financial product among broad society.
A Bid to Revitalize the Local Economy
As the world’s second-largest economy, widely known for its hostile stance against cryptocurrencies, China holds an entirely different view on central bank-backed digital currencies. Only a month after its tech-concentrated city Shenzhen announced plans to distribute $2.3M worth of digital yuan to its residents, the city that houses Tencent is set to airdrop an addition of 30-million digital yuan, roughly worth $4.5 million.
The news came only days after Beijing’s satellite city XiongAn New Area had launched a similar campaign to give out 50 million digital yuan as gifts.
The Shenzhen Municipal Bureau of Commerce will cooperate with several major banks to distribute the digital currencies in the form of “red envelopes” through a “lottery process” to its residents, according to the government’s official release. Participants have the chance to win 88, 100, or 128 digital yuan, and they can spend the money at over 15,000 online or offline shops eligible to process e-CNY transactions. The winners will be picked on May 30th and Jun 9th.
In an attempt to bootstrap the country out of the dire economic consequences of massive lockdowns, the government sees the issuance of e-CNY subsidies as a stimulant for consumption and further promotion of the digital currency. The release stated that small businesses had benefited from previous airdrop campaigns that incentivized consumption, as their numbers of orders had soared within a short period of time.
However, Reuter’s coverage noted that Xia Chun, chief economist at wealth manager Yintech Investment Holdings, considered the giveaways too meager to bring a sizable impact on the severely beaten-down economy.
Pilot Programs Introduced Across the Country
The government has introduced a series of pilot programs to incentivize users to pay via digital currency. Last month, the country’s central bank added nearly a dozen new cities to the existing 10 major “pilot” cities to test the use e-CNY.
According to the data collected by the central bank, e-CNY’s total transaction volume reached 87.6 billion yuan at the end of 2021, with individual e-wallets reaching 261 million.
Besides pushing for domestic use, the government also aims to position e-CNY as a payment option for international transactions. Beijing was well-prepared to promote its digital product to foreigners during the Winter Olympics earlier this year. However, it only attracted a relatively small volume due to the harsh covid policies that excluded many visitors from entering the country.