October 13, 2023
BEIJING – China’s own digital currency has taken a step towards greater use by foreigners, with an update to the official e-CNY app in late September to accept Visa and Mastercard payment options, but overcoming privacy concerns remains an uphill task.
Users no longer need to have a Chinese bank account to top up their balances in the e-CNY smartphone app developed by the central bank.
The app can be used for retail payments in a programme piloted in cities such as Beijing, Shanghai and Tianjin.
With this, e-CNY is now as easy to use as the two dominant e-wallets in China – Alipay and WeChat Pay.
Users of the latter two apps are already allowed to top up their balances using international credit cards.
But analysts believe that broader adoption of the e-CNY still hinges on the issue of trust in the Chinese government.
This is despite measures that the central bank – which issues the digital currency – has implemented to address concerns over the monitoring of transactions.
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The digital yuan is a digitised version of the renminbi. It has the same valuation as the renminbi and makes up a small portion of the cash in circulation.
The digital yuan is not a type of cryptocurrency, which is run on decentralised systems rather than issued by a central authority.
China is among the most advanced globally when it comes to rolling out a central bank digital currency.
According to the authorities, e-CNY is designed to fully meet the public’s daily payment needs, make financial services more accessible, and combat money laundering, terrorism financing and tax evasion.
Observers say that having oversight over the currency is an important consideration for the government.
However, e-CNY has been a tough sell not just to foreigners, but to the domestic audience too.
Several years after its pilot launch, the number of people in China who use e-CNY lags behind those who are content with using the traditional yuan in Alipay and WeChat Pay due to their ubiquity.
About 120 million e-CNY wallets have been opened as at June 2023, according to the People’s Bank of China, which started pilots in 2019.
However, this is still a fraction of the 900 million who use mobile payments in the country.
Digital yuan payments can also be made via WeChat Pay and Alipay.
This is not the first time China has tried to attract more foreign users for the digital yuan.
Foreign athletes used the e-CNY for the first time during the 2022 Beijing Winter Olympics, and at the recently concluded Asian Games in Hangzhou.
Mr Ong Hanjie, director for public relations and communications at Singapore travel agency EU Holidays, welcomed the development, as Singaporeans tend to be more familiar with Visa and Mastercard payments.
His firm organises tours to China frequently.
“This initiative will help more international visitors make payments in China more easily, and could even encourage higher spending,” he told The Straits Times.
Mr Francois Chimits, an analyst at the Berlin-based Mercator Institute for China Studies researching China’s economic development, noted that paying with a foreign credit card in China can still be very cumbersome.
The latest update to the e-CNY app can help to reduce – if not completely alleviate – those difficulties, he said.
To address privacy concerns, the People’s Bank of China has implemented a tiered verification process.
Minimal personal information is required to set up an account. The most anonymised account that can be opened with just a mobile number has a daily payment limit of 5,000 yuan (S$939).
The transaction limit goes up as more user information is verified by the system.
But true anonymity in this context does not exist, wrote professor of finance at Mercer University Vijaya Subrahmanyam in a 2023 article.
This is because currency registration and traceability are built into e-CNY transactions, she added in the piece published by the China Research Centre think-tank in the United States.
“That process, augmented by data mining and big data analysis, provides the People’s Bank of China with the ability to have complete oversight over the use of the currency,” she wrote.
But not everyone is equally worried about such privacy concerns.
Ms Mabelyn Tan, a Singaporean finance professional, does not think it is an issue.
She said the e-CNY wallet update should be helpful if marketed well, although her family still used WeChat Pay during a recent trip to China because it was more widely accepted.
Assistant Professor Dylan Loh from the Nanyang Technological University said that foreigners who already hold a favourable view of China would see the country’s attempts to internationalise the digital currency as an instance of Chinese innovation, progress and a sign of maturity.
Others may remain suspicious of the intention behind this move.
The United States, for example, will be keeping an eye on how e-CNY pans out, and consider the national and economic security implications because the level of strategic trust is quite low, added Prof Loh, who previously wrote about the politicisation of e-CNY.
A key debate surrounding e-CNY is over whether it will promote greater international use of the Chinese currency, challenging the greenback’s dominance.
But even as more foreigners use e-CNY in China, this will not significantly alter the international usage of the yuan, said Mr Chimits.
He explained that this was due to the limited number of foreigners visiting or living in China.
He added: “The internationalisation of a currency is about people outside that country using it, meaning its usage by foreigners in China will not directly affect its international clout.”