Chinese government banks are in full swing to promote a digital yuan. This will compete with Alipay and WeChat Pay and will provide the Chinese government with more data.
The ‘Shopping Festival’ will take place in China on 5 May. In response, six government banks are promoting e-CNY, a digital version of the Chinese Yuan currency. Merchants and customers are encouraged to download digital wallets to pay digitally next week, Reuters writes.
While it sounds formal that it’s not about competition against Alipay and WeChat, in practice, it is. The digital currency will not immediately replace the two current market leaders (today together account for 94 percent of the Chinese online payments market, according to Reuters). Still, it could take over that role in the long term.
More large countries and regions, including the European Union, are considering a fully digital version of their own currency. China is the first country where such a currency will also be rolled out in practice from next week.
It is helpful for the Chinese government to launch such a project. It gives the public banks more insight into the behaviour and expenditure of their citizens. Today, that data is mainly in the hands of WeChat Pay and Alipay.
But the Chinese government has a complicated relationship with Chinese tech companies that are getting too big and, in some areas, more dominant than the government. For example, the IPO of Ant Group (the holding company behind Alipay and Alibaba) was stopped in November, followed by an antitrust fine.