China digital currency: Jiangsu city leverages logistics hub status to promote e-CNY in Belt and Road trade

Xuzhou, the starting point of many Europe-bound freight trains from China, has published a plan that promotes the Chinese digital currency, including its usage in cross-border trade
The e-CNY will be used to pay for services and storage charges for goods carried by the cross-border trains with a plan to extend its usage to paying for taxes and utility services in the city

China digital currency

Coco Fengin Beijing

Published: 6:48pm, 24 Apr 2023

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A city in eastern China's Jiangsu province plans to use the mainland's sovereign digital currency in cross-border trade with Belt and Road countries, as local governments warm up to the electronic money known as the e-CNY.

Xuzhou, the starting point of many Europe-bound freight trains from China, has published a plan that promotes the e-CNY, including its usage in cross-border trade. The city has 18 regular cross-border railway lines to 21 countries in Europe and Asia.

The Xuzhou municipal government said the e-CNY can be used to “better support the Belt and Road Initiative”, referring to Beijing’s trade and investment push. Initially, the e-CNY will be used to pay for services and storage charges for the goods to be carried by the trains.

In future, the e-CNY will also be used to pay for taxes and utility services in Xuzhou, according to the plan.

A staff member shows the payment with China’s digital yuan, or the e-CNY. Photo: Xinhua

Changshu, another city in Jiangsu, went a step further in promoting the usage of the e-CNY. Starting next month, Changshu, which is under jurisdiction of Suzhou, will pay civil servants and people who work for public institutions using digital yuan, according to the state-run Shanghai Securities Journal.

Over the weekend, a Hong Kong Monetary Authority (HKMA) official said the Guangdong-Hong Kong-Macau Greater Bay Area will be a testing ground for making cross-border payments via the digital yuan.

Chinese city plans to pay employees using digital currency

“The HKMA is working with mainland’s central bank, the People’s Bank of China [PBOC], to test the digital yuan as a cross-border payment tool in Hong Kong,” said HKMA deputy chief executive Darryl Chan at the Guangdong-Hong Kong-Macau Greater Bay Area Financial Development Forum on Saturday.

Trials are already under way. In February, the neighbouring city of Shenzhen began offering shopping discounts to tourists from Hong Kong who pay using e-CNY. Last December, the Bank of China (Hong Kong) granted cash incentives to their registered customers who used the digital yuan.

Chan also said the monetary authorities of mainland China, Hong Kong, and two other countries were exploring the use of China’s Central Bank Digital Currency (CBDC) to “improve efficiency and reduce cost of cross-border transactions”, referring to a project that also involves Thailand and United Arab Emirates. In September 2022, the four sides completed a 40-day trial, handling transactions of over 150 million yuan (US$22 million) involving 20 commercial banks.

Some other areas of Suzhou, including the Xiangcheng district, Taicang city and the Suzhou Industrial Park, have been paying wages using digital yuan since as early as last year, Chinese media The Paper reported.

Beijing started exploring a potential sovereign digital currency in 2014, and the first test of the system began in pilot cities such as Shenzhen, Suzhou, Xiongan, and Chengdu in 2019. It is now available in 26 cities and regions across 17 provinces.

At the end of 2022, the amount of digital yuan in circulation reached 13.6 billion yuan, according to the latest data from the PBOC.