Chinese city to pay public employees in digital yuan
Changshu, a city of 1.5 million people in Jiangsu province, China, is planning to pay public sector employees entirely in digital currency.
Part of a wider initiative by China to promote the use of digital yuan, also known as e-CNY, civil servants, schoolteachers, medical staff, technicians, journalists for official media outlets, and state enterprise employees are expected to receive their salaries in e-CNY from May 2023.
Beijing has been exploring a potential sovereign digital currency since 2014, and the first test of the system began in pilot cities such as Shenzhen, Suzhou, Xiongan, and Chengdu in 2020. However, digital currency still faces many challenges, including its limited capacity to settle transactions and the public’s preference for digital payment platforms such as WeChat Pay and Alipay.
Local governments have been encouraging organisations and public utilities to accept the digital currency, while some have launched small-scale trials to use it to pay government subsidies. Changshu has been using it since June 2022 to make overtime payments worth CNY2.5 million (US$363,000) to around 4,900 state enterprise employees. The city has also used e-CNY for its subsidies, such as payments to hi-tech organisations, transport for local government employees, and housing costs.
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In February 2023, the Jiangsu provincial government rolled out a plan to broaden the use of the digital yuan by 2025, including its use for government procurement, tax payments, social security, education, and healthcare costs.
In another development, Hong Kong’s monetary authority is working with the People’s Bank of China to hold trials to use the digital yuan for cross-border payments, enabling residents from Hong Kong and the Greater Bay Area to use it for travel, living costs, and retail consumption, reported SCMP.