China’s Digital Currency: Jiangsu City Exploits Logistics Hub Status to Promote e-CNY in Belt and Road Trade

In a bid to facilitate cross-border trade with Belt and Road countries, the city of Xuzhou in China’s Jiangsu province is planning to adopt the nation’s sovereign digital currency, e-CNY. As the origin of numerous freight trains destined for Europe, Xuzhou has unveiled a plan to promote e-CNY in 18 cross-border railway lines to 21 European and Asian countries.

The Xuzhou municipal government believes that e-CNY will better support the Belt and Road Initiative, Beijing’s trade and investment push. Initially, e-CNY will be used to pay for services and storage charges for goods transported by trains. Eventually, it will also be utilized for taxes and utility services in Xuzhou.

Neighboring city Changshu is also promoting e-CNY usage by paying civil servants and public institution workers in digital yuan beginning next month. Hong Kong Monetary Authority (HKMA) deputy chief executive Darryl Chan announced that the Guangdong-Hong Kong-Macau Greater Bay Area will serve as a testing ground for cross-border payments via digital yuan. The HKMA is collaborating with the People’s Bank of China (PBOC) to test the digital yuan as a cross-border payment tool in Hong Kong.

Several trials are in progress. Last December, the Bank of China (Hong Kong) offered cash incentives to registered customers who used the digital yuan. In February, Shenzhen provided shopping discounts to Hong Kong tourists paying with e-CNY.

Monetary authorities from mainland China, Hong Kong, Thailand, and the United Arab Emirates are exploring the use of China’s Central Bank Digital Currency (CBDC) to enhance the efficiency and reduce the cost of cross-border transactions. In September 2022, a 40-day trial involving transactions of over 150 million yuan (US$22 million) across 20 commercial banks was successfully completed.

Since 2014, Beijing has been exploring the potential of a sovereign digital currency, with the first test beginning in pilot cities in 2019. Currently, the e-CNY is available in 26 cities and regions across 17 provinces. According to PBOC’s latest data, 13.6 billion yuan worth of digital yuan was in circulation by the end of 2022.