China's digital yuan, known as e-CNY, has made significant strides since its development began in 2014, with pilot programs launched in 26 regions since 2019. By June 2024, the cumulative transaction value of the digital yuan reached 7 trillion yuan (approximately US$968 billion) 1. However, the digital currency faces several stumbling blocks that could hinder its broader adoption. Existing payment platforms like Alipay and WeChat Pay dominate the market, making it challenging for the digital yuan to gain traction among consumers 1.
Recent developments have also raised concerns regarding the integrity of the digital yuan's governance. Yao Qian, the former director of the People's Bank of China's (PBOC) digital currency institute, has been accused of bribery related to cryptocurrency activities, which could impact public trust in the digital currency initiative 1.
Despite these challenges, the global interest in central bank digital currencies (CBDCs) remains high, with 94% of 86 central banks exploring their own digital currencies 1. However, the yuan's share of global payments has seen a decline, falling to 2.93% in November 2024, indicating that while China is pushing forward with its digital currency, it still faces significant competition on the world stage 1.
In a bid to enhance usability, a new 'visible hard wallet' has been introduced in Shenzhen, which aims to facilitate easier transactions and increase user engagement with the digital yuan 1. Experts suggest that practical applications and real-world use cases are crucial for the nationwide rollout of the digital yuan, as the government seeks to integrate it more fully into the financial ecosystem 1.
Meanwhile, Shanghai's foreign trade continues to thrive, with imports and exports reaching 3.17 trillion yuan (US$441.6 billion) in the first three quarters of 2023, marking a 2.7 percent increase from the previous year 2. The city's exports rose by 3.9 percent, while imports increased by 1.8 percent, showcasing the resilience of its economy 2. Additionally, Shanghai's trade with the European Union grew by 5.4 percent year-on-year, highlighting the city's strategic importance in global trade 2.
As the digital yuan continues to evolve, its success will depend on overcoming these hurdles and establishing itself as a viable alternative to existing payment systems, while also enhancing China's position in the global economy 1.