China Hand-Picks the Greater Bay Area Surrounding Hong Kong to be the First to Deploy its CBDC
China’s central bank digital currency (CBDC) has been successfully launched earlier this year and the country is currently continuing its path towards fully launching its digital currency electronic payment (DCEP).
Recently, China’s major state-run banks have been testing out the country’s CBDC, according to Wang Zongmin, a former deputy chairman of the Social Security Fund Council. The DCEP project has been confirmed to have completed all backend developments.
China’s digital yuan, as explained by the Director-General of the Institute of Digital Currency at the central bank, is a two-tiered system that will soon be replacing M0, Chinese yuan fiat in circulation. Although the Chinese DCEP is still currently in its testing stage, China may well become the first country to issue a CBDC.
According to Southern Daily, a local news publication, experts believe that the financial technology industry in the southern province of Guangdong is fairly developed and that it has a “natural advantage” in carrying out the deployment of the digital currency.
Why the Greater Bay Area?
The Greater Bay Area, the name given to the southern part of China, including the special administrative regions of Hong Kong and Macau, and 9 cities in the Guangdong region has been focusing on global trade and finance and is no stranger to blockchain. The Greater Bay Area accounts for around 12 percent of China’s national GDP.
In May 2020, China’s central bank, People’s Bank of China (PBoC) announced its development plans for a blockchain-based trade finance platform. He Xiaojun, the director of the Guangdong Provincial Local Supervision Bureau said that Guangdong will further encourage innovation, and break data barriers and deepen business integration with Hong Kong and Macau.
According to the data from the Guangzhou branch of the country’s central bank, in the first quarter of 2020, the Guangdong Province recorded 4.537 billion mobile payment transactions with a value of 11.95 trillion yuan. Mobile payment transactions and transaction value increased by 37.97 percent in the last three years.
The DCEP is currently being tested in closed pilot trials in many of China’s developed cities, including Shenzhen, also in the Greater Bay Area. Bai Hexiang, the President of the Guangzhou Branch of the People’s Bank of China said:
“We support the first pilot application of digital currency payment scenarios in the Greater Bay Area and promote qualified financial institutions in the Greater Bay Area to become pilot institutions for digital currency launch operations. Sharing economy platform companies and retail platform companies participate in the digital currency payment application pilot program, accelerate the opening of digital currency applications by public service departments, actively expand digital currency payment application scenarios, and promote the first application of digital currency in the Greater Bay Area.”
Guangdong is considered to be a very important market in China, with its developed commerce, concentrated population and extensive foreign trade abilities — which could support the expansion of the rollout of China’s CBDC.