The integration of foreign bank accounts into China’s digital currency app could make it much easier for foreigners to get around a largely cashless China in future, Miranda Jarrett from Dao Insights
For foreigners with an eye on visiting China, the past few months have been marked by two major milestones in China’s digital payment landscape. The first was when WeChat Pay and Alipay (China’s dominant digital payment apps, owned by tech giants Tencent and Alibaba, respectively) opened account sign-ups to anyone with a Visa or MasterCard bank account.
The benefits of this long-awaited update are clear – finally, those visiting China’s major cities on a short-term basis can seamlessly get by in what is now a largely cashless society. Payments being restricted to residents with Chinese bank accounts has been a major issue plaguing tourist, business and academic trips right up until this summer.
Last month saw the introduction of a similar but perhaps less celebrated update, this time for the e-CNY digital wallet. This is the official app used for managing the digital form of the Renminbi – otherwise known as China’s Central Bank Digital Currency (CBDC) or sometimes called the digital yuan. The e-CNY is still in the pilot phase, with no set date for a nationwide rollout, but the long-term goal is to fully replace the physical CNY.
As with WeChat Pay and Alipay, the most recent update means foreigners can now open an e-CNY digital wallet using a Visa or Mastercard account, which was previously only possible for account holders at one of seven approved Chinese banks. As an extra bonus, the wallet app has also done away with its requirement for users to sign up with a local Chinese phone number, significantly lowering the barrier of entry for non-Chinese nationals.
The implications of this second milestone are less obvious than for the first. If foreign visitors now have easy access to China’s go-to digital payment options, do they really need access to an e-CNY digital wallet? Why would foreigners want to use this niche, state-sponsored cryptocurrency alternative?
Well, e-CNY may not be as niche as its beta phase status would suggest. According to a recent report from the South China Morning Post, this year has seen major inroads in the uptake of the currency, with 950 million transactions made at a total value of RMB 1.8 trillion (£202.5 billion) as of June. This is an order of magnitude up from last August’s figure of RMB 100 billion (£11.2 billion).
Far from a side project of little import, the e-CNY is a pillar of the Chinese government’s vision for a world-leading digital economy – also known as the ‘Digital China’ blueprint. As well as improving efficiency in the real economy for China’s citizens, this strategy is about turbocharging China’s global influence through technological prowess. Looking beyond the current e-CNY trial program (which now encompasses 23 cities and five provinces), China is hoping that utilisation of its CBDC in cross-border transactions will one day promote the RMB overseas more broadly.
The latest digital wallet update effectively kicks off the internationalisation of the digital currency, with the ultimate goal of elevating the Renminbi to a global reserve currency and challenging US dollar dominance. So, while foreign visitors to China may not need to use the e-CNY just yet, it is set to become an important part of the country’s inbound tourism and international business interactions.
According to the People’s Bank of China, which issues the currency, there are also some practical benefits for users, like increased privacy and security. Unlike WeChat and Alipay, which require real-name verification for transactions big and small, the e-CNY digital wallet offers relative anonymity for the lowest-level wallets as users only need a phone number to sign up.
Analysts expect to see the e-CNY eventually become integrated with Alipay and WeChat due to the unparalleled convenience and market penetration of these “super apps”. The Chinese government is, in fact, actively promoting this integration, as it would give the e-CNY a much bigger user base.
Whether or not the digital wallet app is rendered defunct by this outcome, the e-CNY itself will remain key in China’s long-term goal for a highly digitalised society and globally competitive currency. The extent of these benefits to foreigners is still untested, however, as China is at the vanguard of CBDC development – but it will be exciting for expats and tourists to help innovate this new system.
