Chinese city of Changshu plans to pay employees using digital yuan

Beijing is keen to promote the use of the digital sovereign currency but there are a number of barriers to take-up
Civil servants and other public sector workers in the city in Jiangsu will receive their salaries in e-CNY starting from next month

China digital currency

Josephine Ma

Published: 8:30pm, 22 Apr 2023

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A city in eastern China is planning to pay public sector employees entirely in digital currency, according to local media.

Changshu city, a city of 1.5 million people in Jiangsu, will start paying civil servants and people who work for public institutions with the digital yuan starting next month, according to the Shanghai Securities Journal, an affiliate of state news agency Xinhua.

The move will also affect schoolteachers, medical staff, technicians, journalists for official media outlets and state enterprise employees.

The move marks a major step to promote the use of the digital currency, also known as the e-CNY.

Beijing started exploring a potential sovereign digital currency in 2014, and the first test of the system began in pilot cities such as Shenzhen, Suzhou, Xiongan and Chengdu in 2020.

China has been trying to promote aggressively the use of the centralised digital currency and has even seen it as a possible tool to help break the US dollar’s hegemony.

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But three years on it still faces many hurdles, including its limited capacity to settle transactions and the public’s preference for popular digital payment platforms such as WeChat Pay and Alipay, which is owned by the South China Morning Post’s parent company Alibaba.

Local governments have been trying to promote the digital currency by encouraging businesses and public utilities to accept it, while some have launched small-scale trials to use it to pay government subsidies.

Changshu has been using it since June last year to make overtime payments worth 2.5 million yuan (US$363,000) to around 4,900 state enterprise employees,

Changshu has also used it for a few subsidies such as payments to hi-tech firms, transport for local government workers and housing costs.

In February, the Jiangsu provincial government rolled out a plan to broaden the use of the digital yuan by 2025. The measures included its use for government procurement, tax payments, social security, education and healthcare costs.

It remains to be seen if the Changshu plan will be extended to other parts of the province.

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Beijing says the digital yuan will help protect people’s privacy because e-payment platforms will no longer have access to information about transactions.

However, it will give the government real-time information about all the transactions carried out by individuals and firms, raising concern among foreign analysts.

The news became a hot discussion topic online. Some internet users said paying civil servants with digital currency might help to stem corruption by officials, but others questioned whether older people would be able to cope.

So far the digital yuan has mainly been used domestically, but some economic commentators believe Western sanctions on Russia after its attack on Ukraine – including the ban on the use of the Swift international payments system – has spurred China to accelerate the development of the digital yuan.

Meanwhile, Darryl Chan Wai-man, deputy chief executive of Hong Kong’s monterey authority, told a forum on Saturday that the city was working with the People’s Bank of China to hold trials to use the digital yuan for cross border payments so that residents from Hong Kong and the Greater Bay Area can use it for travel, living costs and retail consumption.