Digital Yuan boosts China-Hong Kong cross-border payments.

Digital Yuan boosts China-Hong Kong cross-border payments.

The Impact of Digital Yuan on Cross-Border Payments in Mainland China and Hong Kong

The Chinese digital yuan, also known as the e-CNY, has been making waves in the blockchain industry. Its recent expansion into Hong Kong has been suggested as a driving force behind the significant increase in cross-border payments between Mainland China and Hong Kong, as well as between the mainland and Macau. According to reports, these types of payments have increased tenfold in the past 12 months¹.

While the rise in cross-border payments cannot be solely attributed to the e-CNY, it is believed to be one of the key factors contributing to this surge. The digital yuan, however, is only recognized as legal tender in Mainland China, as Hong Kong and Macau have their own economic systems and separate currencies²³. Despite this, the People’s Bank of China (PBoC) has been actively exploring ways to enable Hong Kong residents and mainlanders to use the e-CNY for cross-border transactions⁴.

One innovative solution introduced by the PBoC targets Hong Kong residents who frequently travel to nearby mainland cities like Shenzhen. In March of this year, Hong Kong residents were given the ability to use the Octopus app, the most widely used e-payment app in Hong Kong, to purchase e-CNY hard wallet cards at self-service card issuing machines located at the Lo Wu border crossing in Shenzhen⁵⁶.

This app-card link can be utilized at various locations throughout the Guangdong-Hong Kong-Macau Greater Bay Area, facilitating seamless transactions for users⁷. To encourage adoption, the PBoC has also offered Hong Kong users discounts of up to 20% at hundreds of designated retailers⁸. Furthermore, Shenzhen has started accepting e-CNY hard wallet payments from Octopus App-using Hong Kong residents on two of its busiest bus lines, with plans to expand coverage to all bus routes in the future⁹.

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The PBoC’s efforts have resulted in the deployment of 17 hard wallet card-issuing machines in Shenzhen’s Luohu Port area and other parts of the city since March. As a result, over 18,000 CBDC hard wallet cards have been issued to Hong Kong residents¹⁰.

Beijing has also been focusing on driving up payments in the opposite direction, targeting Mainland Chinese travelers to Hong Kong. Chinese banks have claimed that over 200 outlets in Hong Kong now accept e-CNY payments¹¹. Banking platforms enable merchants in Hong Kong to accept CBDC payments from Mainland Chinese customers, with the central bank coin being instantly converted to Hong Kong dollars¹². Notable stores popular among mainlanders, such as Duty Zero by CDF, the IW Hotel in the Kwun Tong district, and the children’s clothing chain Balabala, have already adopted the digital yuan¹³.

In summary, the introduction of the digital yuan has had a significant impact on cross-border payments between Mainland China and Hong Kong. While the e-CNY is not recognized as legal tender in Hong Kong, the PBoC has implemented various initiatives to enable its use for cross-border transactions. These efforts have resulted in a substantial increase in cross-border payments, benefiting both Hong Kong residents and Mainland Chinese travelers. As the digital yuan continues to gain traction, it is expected to further revolutionize the blockchain industry and reshape the future of cross-border commerce.

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References:

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1. China Fund News. (n.d.). Digital Yuan: Playing a Part in Mainland China-Hong Kong Commerce? Retrieved from source↩︎

2. China Fund News. (n.d.). Digital Yuan: Playing a Part in Mainland China-Hong Kong Commerce? Retrieved from source↩︎

3. Ibid.↩︎

4. China Fund News. (n.d.). Digital Yuan: Playing a Part in Mainland China-Hong Kong Commerce? Retrieved from source↩︎

5. China Fund News. (n.d.). Digital Yuan: Playing a Part in Mainland China-Hong Kong Commerce? Retrieved from source↩︎

6. Ibid.↩︎

7. Ibid.↩︎

8. Ibid.↩︎

9. Ibid.↩︎

10. Ibid.↩︎

11. Ibid.↩︎

12. Ibid.↩︎

13. Ibid.↩︎

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