Chinese civil servants are now paid in digital yuan

The digital yuan, also known as e-CNY, has been in circulation in China for more than two years. However, this central bank digital currency (CBDC) is anything but a success. Several unsuccessful attempts have already been made to encourage adoption. In a new effort to speed up adoption, all civil servants in Changshu city will be appointed from May paid with the digital yuan.

Digital yuan no success yet

The Chinese government probably expected something different from the digital yuan. To date, the Chinese have shown little interest in the e-CNY. On February 6, during the Chinese New Year, 180 million e-CNY, worth more than US$26 million, was gifted in various cities.

The new plan, which will start in May, is yet another attempt to force adoption. Changshu is a city located just north of the large metropolis of Shanghai and has about one and a half million inhabitants. Everyone who works for public services, public institutions and government agencies will receive their salary in the digital yuan.

If this test in Changshu is a success, there is a good chance that it will be expanded to a regional or national scale. According to a local report, the aim is to have a well-functioning system for using the e-CNY by 2025.

As mentioned, the adoption of the digital yuan is on the back burner two years after its introduction. It should be mentioned that the country has had to deal with major Covid-19 lockdowns. Nevertheless, since the lockdowns have been lifted, the adoption does not want to go smoothly either. According to official figures from January this year, the total circulation of the e-CNY was only 0.13 percent of the total circulation of the Chinese yuan in China at the time.

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Chinese yuan is steaming up

However, a global shift is currently underway that could quickly change the demand for the digital yuan. Russia and China have dropped the dollar and have been largely using the Chinese yuan for their mutual trade since last year.

At the beginning of this month it was also announced that Brazil is taking the same path. The South American country and China will no longer use the dollar for their bilateral trade. They will use the Brazilian real, and yes, the Chinese yuan from now on.

More and more countries and economic blocs seem to be looking for alternatives to the US dollar. They seem to soon end up with the Chinese yuan. If this trend continues, there is a good chance that the Chinese yuan can take over its role as an international reserve. The digital yuan may also play a major role in this.

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