Shanghai Pushing for Inclusive Finance with New Digital Yuan Pilot
The city of Shanghai is seemingly reaching a new height in its effort to position itself as a major player in China’s race to gain greater influence in digital-age global governance particularly with the use of its digital yuan.
As the Feb 2022 proposed launch date for China’s central bank digital currency (CBDC) draws near, the city’s government last week released a five-year development plan for digital transformation in which it pushes forward yet another digital yuan pilot programme.
Several trials have been conducted for the CBDC in various Chinese cities in the past year. However, the latest Shanghai pilot is to cover a number of sectors including offline and online payment and public transport, civic affairs that will promote the development of new financial technology in various areas of people’s livelihoods.
The plan shows that the Shanghai municipal government will expand the pilot programme for inclusive finance through big data. This entails the release of more than 200 billion yuan ($31.3 billion) as loans for small and medium-sized enterprises and farmers within the 2021-25 period as Shanghai seeks to become an international digital city of global influence by 2035.
In a related development from the private sector, organisers of the 4th China International Import Expo (CIIE) have confirmed that the digital yuan will be used at the international event’s venue.
Slated to be held from November 5 to 10 in Shanghai, the CIIE expects to have nearly 3,000 enterprises from 127 countries and regions participating. According to Sun Chenghai, deputy director of the CIIE bureau, the event is a gathering point for countries along the “Belt and Road” including those that are developed, developing and the least developed of them. The event somewhat suggests to be a platform for a wider use of the CBDC in an internationalized environment as well as to increase its exposure to foreigners.
Insights suggest yuan set to be more important
In the countdown to the Winter Olympics in Beijing by February, the digital yuan’s prominence is set to grow even bigger. Forrester’s 2022 predictions for the Asia Pacific region suggest that at least a billion people will access world-leading digital government services including digital identity, digital currency, and data interoperability. Alongside the the fact that countries like Singapore, India, and Australia already have established digital identity solutions, the consulting firm notes that more than 20 million Chinese have used the digital yuan even as more trials are still being planned.
A big boost to the yuan is the recent inclusion of the Chinese government bonds (CGBs) in the FTSE World Government Bond Index (WGBI) according to UK index provider FTSE Russell which some experts believe indicates global investors’ confidence in CGBs and has the tendency to raise the yuan’s international status.
While Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, says the move will help increase demand for yuan, independent economist and senior executive vice president of Bank of China Johannesburg Branch, Gao Desheng, told the Global Times that FTSE WGBI’s inclusion is further proof that the US’ unilateral isolating of China has failed.