China is using the digital yuan (e-CNY) to stimulate consumption, and new e-currency-compatible apps should be launched to increase the transparency and effectiveness of government policies.
The southern city of Shenzhen began distributing 30 million yuan (US$4.50 million) in free digital money on Monday (30) to revive consumption hit by social isolation measures.
This comes days after Xiong’an New Area in northern Hebei Province launched a similar campaign to distribute an amount of e-CNY equivalent to 50 million yuan for free.
China is at the forefront of the global race to develop central bank digital currencies. Issuing free e-CNY can help consumption and further promote the use of electronic money.
Transactions using e-CNY totaled 87.6 billion yuan at the end of 2021, with 261 million individual e-wallets open, according to China’s central bank.
“Before, when the government issued subsidies, there could be certain obstacles before the money reached recipients,” said G. Bin Zhao, senior economist at PwC China. “With the e-CNY, the money falls directly into the hands of the population, increasing transparency,” he said.
Zhao added that in the future, the government will be able to use the 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 subsidies, although he thinks the size of the current consumption stimulus is tiny.
Lin Yifu, an economist at Peking University, said earlier this month that China should distribute 1,000 yuan to each family in areas targeted by social isolation measures, half of which in digital yuan.
In the current campaign, consumers in Shenzhen can participate in a lottery for the free e-CNY, which can be used to shop online or in physical stores. In Xiong’an, digital cash subsidies can be used to buy products such as food, home appliances and furniture.
Source: CNN Brasil
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