China Sets Trial Run For Digital Yuan in Top City Hubs

Chinese authorities will expand test use of the country’s prototype digital currency across the nation’s three leading urban clusters centered on Beijing, Shanghai and the southern cities of Guangzhou, Shenzhen and Hong Kong. From a report: The move, announced by the Ministry of Commerce, expands the coverage area for testing the cyber currency to a potential user base of around 400 million, or 29% of the country’s population. It has been trialed since April in four cities with a combined population of 41 million, Work on the digital yuan, which is intended to be interchangeable with the country’s paper currency, started more than five years ago but accelerated after Facebook unveiled its Libra digital currency project in June 2019. Rising concerns that the U.S. could try to throttle China’s access to the global dollar-based financial system, amid mounting tensions between Washington and Beijing, have fed further interest in the effort. “The digital yuan as a competitor of the greenback is more of a long-term phenomenon,” said Andrew Collier, managing director of financial research company Orient Capital Research in Hong Kong. “Digitalization doesn’t address the lack of free convertibility of the yuan,” he said. “However the digitalization of the currency and other settlement systems gives an advantage to its (China’s) institutions, which will be significant when the currency is liberalized.”