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China to Pilot Financial Innovations Including Digital Currency in Shenzhen

China has recently outlined the plans for the future development of the Shenzhen Special Economic Zone, in which innovation applications such as digital currency research and mobile payment are supported in the pilot demonstration area.

According to the guideline supporting Shenzhen released by the Communist Party of China Central Committee and the State Council on Sunday,

“(the country will) support innovative applications such as digital currency research and mobile payment in Shenzhen. Promote interoperability with Hong Kong and Macao financial markets and mutual recognition of financial (fund) products. In the promotion of the internationalization of the Renminbi, we will try first and explore innovative cross-border financial supervision.”

As per the guideline, the country is aiming to build Shenzhen into a world’s cosmopolis and a global pacesetter by mid-century. Prior to it, it will allow various financial innovations to have a test run in this coastal city neighboring Hong Kong including digital yuan.

The news comes on the heels of the Chinese government announcing that its central bank digital currency is ready to roll out after five years in the making.

Shenzhen, a former fishing village neighboring Hong Kong four decades ago when China started the reform and opening-up policy first in the soil, surpassed Hong Kong in terms of GDP in 2018 to become the largest economy among cities in the Greater Bay Area (Guangdong-Hong Kong-Macao Greater Bay Area).

As a major financial market innovation, blockchain achievement the city has made has also been eye-catching. In 2016, under the guidance of Shenzhen government, the country’s first Alliance of Fintech Digital Currency and China Fintech Research Institute was initiated; in 2017, its local government improved its policy support for fintech by awarding 6 million yuan to blockchain enterprises, and the PBoC’s Shenzhen Fintech Research Institute was founded later the year.

In terms of blockchain applications, Shenzhen has issued over six million blockchain-based e-invoices in a year since their inception in August 2018, with more than 5,300 local companies in 113 sectors having joined Shenzhen’s blockchain invoice program so far. The city also takes the lead in terms of the number of blockchain-related patents (459 pieces in 2018), only second to the country’s capital Beijing.

The guideline supporting Shenzhen is believed by some analysts to be a move to upgrade the city to a better place compared with its neighbor Hong Kong, where radical protests lasting two months have cast a shadow on its role as an international financial hub. On the other hand, for bitcoiners in the country, they see it bullish news as it means digital currency will soon have a test run in the pilot city and later to the whole country.

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