Digital yuan helps stimulate consumption, supports recovery of SMEs across China

A visitor (R) applies to access payment with digital Chinese yuan (e-CNY) at the first China International Consumer Products Expo in Haikou, capital of south China's Hainan Province, May 8, 2021. (Xinhua/Guo Cheng)

Multiple Chinese cities have recently issued “red packets” of digital yuan, or e-CNY, to stimulate consumption, with more e-CNY applications to be introduced in the future.

On May 30, Shenzhen city in south China’s Guangdong Province started distributing e-CNY red packets worth 30 million yuan (about $4.50 million) on Meituan, a Chinese e-commerce platform, to revive consumption and aid businesses.

In the latest campaign, local consumers could join in a lottery for digital yuan red packets to spend the embedded money at over 15,000 offline merchants and through online consumption scenarios provided by Meituan.

Similarly, Chengdu city in southwest China’s Sichuan Province began handing out digital yuan consumption vouchers on Meituan on June 12. The vouchers can be used to foot the bill for food, hotel bookings, tickets for tourist attractions, and other life services on Meituan.

Wenzhou city in east China’s Zhejiang Province issued red packets of digital yuan worth 30 million yuan between June 19 and June 21, while Xiamen city in southeast China’s Fujian Province began giving away digital yuan red packets worth 20.22 million yuan and e-CNY discount coupons worth 40 million on June 22.

Driven by digital yuan red packets and consumption vouchers, consumers have shown enthusiasm using the e-CNY when engaging in consumption activities. From May 30 to June 19, the average daily number of orders on Meituan paid in digital yuan rocketed about 115 percent, compared with the number from May 9 to May 29. Rolled out in January this year, the e-CNY payment service on the platform had attracted some 6 million users by June 20.

Data from JD Technology, a subsidiary of e-commerce giant JD.com, has indicated that users spent a total of about 400 million yuan using the e-CNY on the e-commerce platform during the mid-year shopping festival known as “618” that lasted for weeks, more than 18 times the sum for the same period one year ago.

Issuing e-CNY subsidies can aid consumption and helps small and medium-sized businesses in recovering from the effects of the COVID-19 pandemic.

“After Shenzhen started issuing consumption vouchers and digital yuan red packets, our business has gotten better,” said an executive at a 24-hour supermarket chain based in Shenzhen, adding that the chain received a much larger number of orders during the three-day Dragon Boat Festival, which fell on June 3 this year.

The supermarket chain, though seeing a hit from the ongoing pandemic, saw a recovery in its prospects thanks to the digital yuan red packets recently distributed by Shenzhen. Over 20 supermarkets operated under the chain have benefited from the digital yuan red packets, the executive introduced.

From May 30 to June 19, consumers used the e-CNY at over 52,000 merchants in Shenzhen listed on Meituan. Their total number of orders increased by 58.9 percent year-on-year and the total order value meanwhile rose by 64.6 percent from the same period last year.

Data from the People’s Bank of China (PBOC), the country’s central bank, showed that transactions using e-CNY reached about 87.6 billion yuan by the end of 2021, with 261 million individual wallets for the digital yuan opened and over 8 million application scenarios formed.

The combination of the e-CNY, consumption vouchers and e-commerce platforms can promote the use of the digital yuan and boost the recovery of consumption, said Zhou Maohua, a researcher with the China Everbright Bank.

The usage of digital yuan has also been extended to include financial services. Recently, China Construction Bank has allowed its mobile app users in pilot cities to buy wealth management products with the e-CNY.

As pilot cities continue to promote the use of digital yuan, the e-CNY is expected to be used in increasingly more diverse scenarios.

An official with the PBOC said that the central bank would further deepen the pilot use of the e-CNY in retail transactions, lifestyle-related fee payments, government services and other scenarios.