PBOC to Test Digital Yuan via Didi

The digital currency unit of the People’s Bank of China (PBOC) is collaborating with Didi Chuxing Technology Co. This is in order to test digital cash electronic payment (DCEP) on the ride-hailing group’s platform.

They announced the move on Wednesday. It could make the Beijing-based transportation giant one of the world’s first corporate users of a government-developed virtual currency.

The ride-sharing app stated that the partnership took place in an environment where the government seeks to support the development of the real economy sectors with innovative finance services.

The DCEP will become a key infrastructure of the digital economy, the company said in a Chinese statement.  They added they would work with the government to boost the integration of the digital economy with the real economy.

Outlook for China’s DCEP

Six years ago, the PBOC assembled a research team to look at the possibility of introducing its own electronic version of the yuan. The strategy will potentially reduce spending on the circulation of traditional paper money and strengthen policymakers’ control of the supply of money.

Adoption by Didi, which currently serves more than 550 million users, could also encourage acceptance of the country’s virtual currency and expand China’s global lead in government-sanctioned digital coins.

Beyond its main ride-hailing business, the group is attracting grocers and merchants onto its platform. They also may be able to gain access to national virtual tokens.

Chinese government officials said last year that the digital coin was almost ready. However, they have not specified a launch date in recent months, although they have been conducting tests.

Tests so far

They carried out the initial testing in four cities, including Shenzhen, Suzhou, Chengdu, and Xiong’an. The last was described as the new smart city in the making. The local media have reported that some of the money was distributed via transport subsidies paid to residents in Suzhou.

If adopted, the system may compete with China’s twin internet giants, Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Alibaba and Tencent, which support Alipay and WeChat respectively. They are currently dominating the country’s $27 trillion payments sector.

Didi is also using payment tools from Tencent and Alibaba’s fintech arm, Ant Financial Services Group. This makes the transportation company an ideal candidate for the DCEP.

Once a national launch occurs, things may move at a fast rate. More than 80% of smartphone users in China regularly pay using their mobile devices, which is the highest in the world, according to a Swiss investment firm.

Many Chinese consumers are eager users of financial technology. In 2013, Ant Financial’s money market fund, Yu’e Bao, grew to a level of popularity to where it was at one point the world’s biggest money fund.