One of China’s largest cities is giving out $1.5 million worth of the country’s new digital yuan to its residents to boost its adoption. Shenzhen will gift 50,000 residents with the digital currency, which they can then spend in over 3,300 stores in the city.
Luohu district in Shenzhen will distribute 50,000 digital ‘red packets’, each containing 200 yuan ($29.7) in a lottery. In China, a red packet is a monetary gift given during holidays or other special occasions. Luohu is allowing every citizen residing in Shenzhen city to register for the lottery through a blockchain-powered public services application known as iShenzhen.
Once the winners are selected, they will receive their red packet through the Digital Reminbi App. As revealed by the South China Morning Post, the e-wallet is not yet publicly available and will only be accessible to the winners via a link sent to them by the Shenzhen government.
Upon receiving their DCEP, the winners can then spend it on 3,389 designated shops in Luohu district from October 12-18, the report states. The digital yuan can’t be transferred into a regular bank account or between individuals. This is part of the government’s effort to ensure that the DCEP goes towards reviving the local economy as the city rebuilds following the COVID-19 pandemic.
The move by the Shenzhen government was praised by many finance experts in China. According to Hang Seng Bank’s chief economist Dan Wang, each digital yuan spent will create more sales than other types of indirect subsidies through the multiplier effect.
He told the outlet, “A back-of-the-envelope calculation would suggest that this 10-million-yuan ($1.5 million) programme will generate at least 50 million yuan ($7.5 million) in total demand.”
Shenzhen joins Suzhou, Chengdu and Xiongan cities in conducting pilot programs for China’s digital currency electronic payment (DCEP). The pilots have been a great success, Fan Yifei, the central bank deputy governor revealed during a recent event. They have generated 3.13 million DCEP transactions so far, with use cases ranging from bill payments to transport.
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