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A Digital RMB Trial on the Ground in Shanghai

The digital RMB or E-CNY is a central bank digital currency, or digital money released directly to the public by a country’s central bank. The primary purpose of these digital currencies is to fill the gap that emerges as countries transition away from cash. In this video, KraneShares cultural analyst Xiabing Su takes us on the ground in Shanghai to enroll in the digital RMB trial, then shows how it is used both for online and offline shopping. Investment Strategist Henry Greene explores the Digital RMB’s applications and implications on the future of central bank digital currencies.

Transcript

Henry Greene 

China’s central bank digital currency has been garnering attention worldwide. As blockchain technology threatens to disrupt legacy payment systems and currencies, governments and banks alike have been crafting their responses to the new technology.  China’s response is perhaps the most fully formed on the world stage. Trials have already begun, through the digital RMB app as well as through Alipay. Let’s go on the ground in Shanghai, and speak with my colleague Xiabing, and see how she’s been using her digital RMB trial to make purchases. 

Xiabing Su

Hi guys, this is Xiabing from KraneShares, and welcome to Shanghai. Now I’m heading to the bank of China to apply for the digital RMB trial. It has been hot in China since people are curious about how we can use it and its applied scenarios. I know there are two ways you can take part in the trial. The first is you are selected as an Alipay user. The second is you go to the bank in person and apply by yourself. I will be a very early adopter at this point since everything is still in the testing phase.  Exciting right? Let’s go and see what will happen. 

The application process is quite simple: scan a code to download the digital RMB app (since it is not yet available in the app store) and in 3-5 business days you receive your digital RMB wallet.  While the full-fledged digital RMB will not require the linking of a bank card, it is currently in the testing phase. So, I need to add funds through my bank.  Now that I have the wallet set up, let’s go out and test it for a little offline shopping! 

We’re now on Nanjing Road, which is a busy and vibrant shopping street located in the heart of Shanghai. It’s pretty much like Times Square in New York. This area is full of shops and restaurants that accept the digital RMB.   There are cigar shops, beverage stores and I decided to test it by buying some desserts! As you can see, all you need to do is scan a code, enter the amount and make a payment.  It works just like regular currency does through mobile apps. According to official news, the digital RMB will eventually allow for payment just by touching two devices together. A user will even be able to send and receive funds offline.  

Apart from offline shopping, I noticed digital RMB wallet will also be able to be used in many online apps as well. There is a “sub-wallet” function that you can connect to many apps for daily use, including DIDI, Meituan, Trip.com, Hema, JD, and even Bilibili. However, since the new payment infrastructure is still in development, not all scenarios are supported. Most of the restaurants on Meituan near my area have not been built into the system yet.   

Henry Greene

Thank you Xiabing! As you can see, digital RMB is exchanged just like regular money is exchanged all the time through digital payment apps and it has been for a while. The main difference for digital RMB is, from a policy perspective, the Central Bank believes that through the use of digital currency, we will have better data on how money has been spent in the economy, and therefore can more accurately target the policy.  

Digital RMB has implications outside China. About 6 global central banks have now experimented with or entered into some research phase about a digital currency1. Therefore, China would be an interesting test case for these other central banks. The Federal Reserve in the United States has also considered creating a federal payment system or even a digital currency. China will most likely to be used as a prime example of how such systems would work and whether extending central bank reserves to the consumer is feasible or worth it.   

Xiabing Su

Thank you, Henry, and welcome back. 

Three core features of E-CNY that we believe make this a massive market opportunity for international investors are 1.)It allows people without bank accounts to participate in China’s digital economy 2.) It does not require internet access, and 3.) it will be easily accessible to international visitors.

People living in China’s rural and lower-tier cities often lack access to the banking system and have inadequate or non-existent internet connections. By helping solve these two roadblocks, E-CNY presents a massive user growth opportunity for China’s E-Commerce platforms. To put the opportunity into perspective, around 30% of China’s population still lacks access to the internet2. This represents over 400 million people, which is more than the entire population of the United States3.

Finally, many foreigners who visit China find their international bank cards may not be as widely accepted as they are elsewhere in the world. This is especially true when connecting international bank cards to the apps in China that power its digital economy. By eventually opening up E-CNY to foreigners, China’s E-Commerce platforms can expand their audience to international visitors and beyond.

Many people are very curious about the relationship between digital RMB and third-party payment processors. According to Mu Chuangchun, who is the Director of the Central Bank Digital Currency Research Institute, Alipay and WeChat Pay work just like wallets, and Digital RMB is the actual currency. So they are not operating in the same dimension. For users like us, digital RMB is another way to reduce the use of cash. Rather than competitors, they are more like partners since Alipay has already incorporated this new feature into its application. In most shopping scenarios, we are still choosing WeChat Pay and Alipay. These two account for 90% of online mobile transaction volume in total. This is really unlikely to change very soon. By adding the new digital RMB feature, it can help to increase the user base (for WeChat Pay and Alipay). 

This is Xiabing, please let me know what you want to see next time. Remember to subscribe Chinalastnight.com. I will see you next time. Bye! 


  1. Baker, Paddy.“6 Central Banks Form Digital Currency Use Case Working Group,”Coindesk. January 21, 2020. 
  2. Data from Statista and The World Bank as of 2/9/2021. Retrieved 7/1/2021.
  3. Data from Statiscta, “Total population in the United States from 2015 to 2025”, Oct 2020
  4. Data from Xinhuanet.com, Oct 27, 2020