China’s Digital Currency Underperforms Despite Government Promotion

China’s digital currency has failed to takeoff with consumers and businesses, according to 2021 figures released by the country’s central bank.

The People’s Bank of China (PBOC) began conducting trials of the digital yuan in the last two years. Since then, cumulative transactions in the currency have reached 87.57 billion yuan ($13.68 billion U.S.). That means digital yuan transactions totaled 53.1 billion yuan in the second half of last year.

For context, Ant Group’s Alipay disclosed in 2020 that monthly payment volume averaged 10 trillion yuan. The company is an affiliate of Alibaba that operates one of China’s two dominant apps for mobile pay and has become the dominant form of consumer payment.

China’s digital yuan users have increased faster than transaction volume. The number of individual digital yuan users climbed to 261 million as of the end of 2021, an increase of 240.13 million from the end of June, according to the PBOC.

However, far fewer businesses accept the digital yuan, and it remains unclear what incentives consumers have to use the currency versus Alipay or WeChat Pay.

As of October, about 10 million businesses had digital yuan wallets, according to state media. That’s far below the more than 80 million monthly active merchants of Alipay.

Still, the digital yuan’s wider availability and government promotions could encourage greater use. Earlier this month, China’s central bank started allowing the general public to download a pilot version of the digital yuan app from the Android and Apple app stores, for users in 10 Chinese cities