The southern city of Shenzhen began handing out 30 million yuan ($4.50 million) of free digital money on Monday to boost consumption and help businesses. The move comes days after Xiong’an New Area in the northern province of Hebei launched a similar campaign to distribute “red packets” of e-CNY worth 50 million yuan.
China is at the forefront of a global race to develop central bank digital currencies. Issuing subsidies for e-CNY can both help consumption and further promote the use of electronic yuan.
Transactions using e-CNY totaled 87.6 billion yuan at the end of 2021, with 261 million individual e-wallets opened, according to the central bank.
“Previously, when the government issued subsidies, there might be some hurdles before the money reached the beneficiaries,” said G. Bin Zhao, senior economist at PwC China.
“With e-CNY, the money lands directly in your hands,” which enhances transparency, he added.
Zhao added that in the future, the government will be able to use e-CNY for pension payments, tax subsidies and even infrastructure spending.
Xia Chun, chief economist at wealth manager Yintech Investment Holdings, said that compared to traditional means, e-CNY is more efficient and faster when it comes to grants, although he believes that the size of the current consumption stimulus is too small.
Lin Yifu, an economist at Peking University, said in a speech earlier this month that China should distribute 1,000 yuan to each family in the locked areas, half of it in digital yuan.
In the latest campaign, consumers in Shenzhen can enter a lottery to get free e-CNY, which can be used to shop online or in stores. Xiong’an, digital cash grants can be used to purchase products including food, electronics and furniture.
($1 = 6.6600 Chinese yuan)
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