China uses digital yuan to stimulate virus-hit consumption

The southern city of Shenzhen started distributing 30 million yuan ($4.50 million) worth of free digital cash on Monday to revive consumption and aid businesses.

China is using the digital yuan to stimulate consumption in its pandemic-hit economy, with more e-CNY applications expected in future to boost transparency and effectiveness of government policies.

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The southern city of Shenzhen started distributing 30 million yuan ($4.50 million) worth of free digital cash on Monday to revive consumption and aid businesses. It comes days after Xiong'an New Area in northern Hebei province, launched a similar campaign to hand out 50 million yuan worth of e-CNY "red packets" as gifts.

China is at the fore of a global race to develop central bank digital currencies. Issuing e-CNY subsidies can both aid consumption and further promote use of the electronic yuan.

Transactions using e-CNY totalled 87.6 billion yuan at the end of 2021, with 261 million individual e-wallets opened, according to the central bank.

"Previously, when the government issued subsidies, there could be certain obstacles before the money reaches the recipients," said G. Bin Zhao, senior economist at PwC China.

"With e-CNY, the cash directly lands into your hands," boosting transparency, he said.