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INTERNATIONAL > East Asia & Pacific

Commentary: Cashless pioneer China extends lead with digital yuan

  • August 6, 2021
  • , Nikkei Asia , 2:01 p.m.
  • English Press

TETSUSHI TAKAHASHI, Editor, Economic News Group

 

TOKYO — I suffered one of the most embarrassing moments of my life the other day, when I finished my bowl of noodles at a popular Chinese restaurant in the Japanese capital and was about to pay the bill.

After telling the server I would use my phone to pay for the meal, I received an utterly unexpected response: “We are cash-only.”

 

My mind went blank. I did not have cash on me. When I told the server of my inadvertent faux pas, I was met by the cold stares of my fellow diners, who seemed to be silently accusing me of trying to pull a dine-and-dash scam.

 

I rushed to the nearest ATM, took out money, raced back to the restaurant and managed to clear my name. Since that awful experience, I have been making sure to carry cash.

 

After living in Beijing for four years until April of this year, I had become accustomed to a cashless lifestyle.

 

Mobile payments are the way to go in China. Almost every store takes the two most-popular payment platforms — Alibaba Group’s Alipay and Tencent-affiliated WeChat Pay. Today, smartphone payments are estimated at more than 80% of all transactions.

 

In fact, cash payments are discouraged as a way to stop counterfeit notes. Oftentimes retail associates will hold bills up to the light or use a device to see if they are indeed authentic. This can be an unpleasant experience when using paper money.

 

Following the COVID-19 outbreak at the beginning of last year, stores posted signs that strongly discouraged the use of cash over concerns it could transmit the highly contagious virus. This meant even older people who had been hesitant to use mobile payments had no choice but to go digital. Without a doubt, the coronavirus served as a driving force that further turned China into a cashless society.

 

“It’s surprisingly easy to use,” an older adult said after making a mobile purchase for the first time.

 

Despite security concerns, mobile payments are truly convenient, and it is this convenience that has helped them rise in popularity.

 

The People’s Bank of China, the country’s central bank, has been working toward a full launch of a digital version of the yuan — and now the cybercurrency is available to use even for foreign residents in cities where pilots are conducted.

 

Transactions are completed in a matter of seconds by scanning a bar code from an app, according to a colleague in Beijing who has used the digital yuan. The process is simple and easy, just as with Alipay or WeChat Pay.

 

Some are concerned that the digital yuan poses a threat to the U.S. dollar’s status as the top global reserve currency. But regardless of a paper or digital form, the Chinese currency will be subject to strict capital controls. Unless the limits on flows outside of China are removed, the yuan is not going to be a candidate for preferred medium of exchange.

 

What will likely happen is that the central-bank-issued digital yuan will become a consumer-friendly currency. If China’s 1.4 billion people start to use the virtual yuan, its international influence is sure to grow in the post-pandemic world.

 

Japan needs to catch up with China and other economies in the race to go cashless.

 

“China is ahead of Japan in this field and there are many things to learn” from the neighbor, said Tomoyuki Fukumoto, former head of the Bank of Japan’s International Department who is now with Osaka University of Economics.

 

Chinese tourists are certain to return to Japan after the pandemic is over. Who would feel regretful if vendors here say, “Sorry, cash only?”

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