The Chinese digital yuan pilot program’s expansion into Hong Kong is believed to be contributing to the increase in cross-border payments between Mainland China and Hong Kong, as well as between the mainland and Macau. According to China Fund News, certain types of cross-border payments have increased tenfold in the past year. While the rise in cross-border commerce can be attributed to various conventional cross-border banking innovations, the e-CNY is considered one of the key driving forces behind this growth.
It’s important to note that the digital yuan is currently only legal tender in Mainland China. Hong Kong and Macau have their own economic systems and separate currencies. However, the People’s Bank of China (PBoC), the country’s central bank, has been actively exploring ways for Hong Kongers and mainlanders to use the digital yuan when traveling across the border.
One such innovation targets Hong Kong residents who visit mainland cities like Shenzhen. In March of this year, Hong Kong residents were given the ability to purchase e-CNY hard wallet cards using the Octopus app, Hong Kong’s most widely used e-pay app. Self-service card issuing machines were installed at the Lo Wu border crossing in Shenzhen, allowing Hong Kong residents to obtain these wallet cards. This app-card link can be used at various locations within the Guangdong-Hong Kong-Macau Greater Bay Area. To further incentivize adoption, the PBoC offered Hong Kong users discounts of up to 20% at designated retailers.
Shenzhen has also started accepting e-CNY hard wallet payments from Hong Kongers who use the Octopus App, specifically on two of its busiest bus lines. The city plans to gradually expand coverage to include all of its bus routes in the future. The Shenzhen branch of the PBoC reported that since March, 17 hard wallet card-issuing machines have been deployed in the Luohu Port area and other parts of the city. Over 18,000 CBDC hard wallet cards have been issued to Hong Kong residents.
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In addition to driving payments from Hong Kong to mainland China, Beijing has also focused on increasing payments in the opposite direction from Mainland Chinese travelers to Hong Kong. Chinese banks have claimed that over 200 Hong Kong outlets now accept e-CNY payments. Banking platforms enable merchants in Hong Kong to accept CBDC payments from Mainland Chinese customers, with the central bank coin instantly converted to Hong Kong dollars. Popular stores among mainlanders, including Duty Zero by CDF, the IW Hotel in Kwun Tong district, and the children’s clothing chain Balabala, have embraced the digital yuan.
The expansion of the digital yuan pilot program into Hong Kong has presented new opportunities for cross-border payments and commerce. While conventional cross-border banking innovations also contribute to this growth, the digital yuan has played a significant role. With efforts to encourage adoption and the acceptance of e-CNY payments in various outlets, it is evident that the digital yuan is reshaping cross-border transactions between Mainland China and Hong Kong.
