China’s digital yuan ‘at forefront globally’, former central bank governor Yi Gang says
- Yi Gang, who was replaced by Pan Gongsheng as the head of the People’s Bank of China (PBOC) at the end of last month, gave two recent lectures in Beijing and Singapore
- He said the digital yuan could facilitate a wide range of domestic retail payments, including by foreign visitors, while it also has overseas use
China’s former central bank governor used the final two lectures of his five-year tenure to highlight the digital yuan, hailing it as being “at the forefront globally”.
Yi Gang, 65, was formally replaced by 60-year-old Pan Gongsheng as the head of the People’s Bank of China (PBOC) at the end of last month.
“The digital yuan focuses on retail payments, which enables the most significant improvements in efficiency, payment system redundancy and advancing inclusive finance,” Yi said at Tsinghua University in Beijing on July 5, according to a transcript of the closed-door lecture released on Thursday.
China’s digital currency, known as the e-CNY, could facilitate a wide range of domestic retail payments, including by foreign visitors, while it also has overseas use, added Yi.
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The digital yuan, along with green finance initiatives, highlight Yi’s legacy as central bank governor, in addition to traditional tasks of helping the coronavirus-hit economy, preventing financial risks and controlling inflation.
Yi is now the president of the Chinese Society for Finance and Banking, while he is also a deputy director under a government advisory body, the Chinese People’s Political Consultative Conference.
With Pan now at the helm, the central bank pledged during its midyear work conference this week that it will continue pushing research and trials of the digital yuan, while also enhancing its financial infrastructure and services.
China was the one of the first major economies to study a central bank digital currency, with a research institute chartered under the PBOC in 2016 preceding moves by the European Central Bank and the US Federal Reserve.
The PBOC has designed a two-tier centralised digital yuan, which is primarily used for retail payments, with pilot schemes conducted in 17 provinces.
It has managed anonymity in payments to ease market concerns over privacy, and it wants to dilute its store of value function “because it will generate other problems”, Yi added.
The PBOC will also prioritise monetary sovereignty in cross-border use of the digital yuan, aiming to increase efficiency and lower costs.
As of March, 891.86 billion yuan (US$124 billion) has been spent across 750 million digital yuan transactions.
Around 100 million e-wallets have also been opened through the digital yuan app, with a total balance of 8.67 billion yuan.
The promotion of the e-CNY should be market oriented, not by administrative orders
“The promotion of the e-CNY should be market oriented, not by administrative orders,” Yi told a lecture hosted by the Monetary Authority of Singapore on July 19.
“The e-CNY will coexist with physical cash for a long time. As long as there’s demand for physical cash, the PBOC shall not stop the supply.”
China’s digital yuan has been used in a variety of payment scenarios, from shopping, utility bill payment, payroll and cross-border transactions.
In June, a new e-CNY exchange machine was set up in the holiday resort of Sanya on the island province of Hainan.
It facilitates the exchange of 20 different currencies for digital yuan, offering foreign visitors access to a local mobile payments ecosystem.
