China

China's interest in potentially establishing a CBDC began in 2014 when a study of retail digital money was initiated by the People's Bank of China (Higgins 2016). In 2017, China's State Council approved the PBOC's proposal, in cooperation with commercial banks, to design the CBDC. This work was done by a Digital Currency Research Institute under the aegis of the PBOC and its aim is to design a digital currency electronic payment (DCEP) system that will function much like a digital form of cash. For retail payments it will operate principally through smartphones.

At the end of 2017, on the approval of the State Council, the PBOC began to work with commercial institutions in developing and testing digital fiat currency (hereinafter referred to as e-CNY, a provisional abbreviation following international practice). In May 2019, PBOC governor Yi Gang stated that “top-level design” of e-CNY had already been completed and announced that initial pilot projects would take place in Chengdu, Shenzhen, Suzhou and Xiong’an (Lloyd & Savic 2021). In Suzhou, for example, some government workers were told to download an e-CNY digital wallet app. In May 2020, government workers in Suzhou began to be paid portions of a transportation subsidy via DCEP (Fathi 2022).

The general concern for the PBOC, along with other central banks at the time, was that the introduction of a sizeable, global, private payments digital currency, such as Diem, could eventually mean that they might lose control over the issuance of their currency, including cash, as a medium of exchange. China has experienced a substantial move to cashless payments, which has meant that individuals have been losing direct access (because of the increasing dominance of Alipay and Tencent payment applications) to the cash renminbi as China's currency. The introduction of a CBDC would not only resolve this problem, but monetary policy could be, if desired, directly transmitted to the general public (BIS 2021).

According to the PBOC's own survey conducted in 2019 (PBOC 2021b), mobile payments accounted for 66 per cent of all transactions and 59 per cent of the total value, whereas those paid in cash accounted for 23 per cent and 16 per cent, and those paid by card 7 per cent and 23 per cent, respectively.