(playful music)
(speaking in foreign language)
(cashier beeping)
- [Narrator] Huang Dan just paid with a new type of money
at this pharmacy.
(speaking in foreign language)
- [Narrator] That's because China's paper cash
is going digital.
(speaking in foreign language)
- [Narrator] The digital yuan is meant
to be faster than using credit or debit cards
on digital wallets like Apple Pay.
(phone dinging)
Plus there are other incentives,
like zero transaction fees for merchants
and one day, it'll even work offline.
But one major difference
is that the digital yuan is 100% trackable
by China's central bank
and when it's launched nation wide,
it could impact not only citizens
but also foreign companies operating in the country.
- The central bank will know who's paying,
how much they're paying, when they're paying,
where they're paying
and then to analyze the patterns of payment.
- [Narrator] China's central bank has also said it plans
to gradually replace all cash and coins
with the digital yuan.
The country would be the first major economy
to introduce a digital currency in the real world.
And while many users say the digital yuan is easy to use,
China's money revolution could usher in privacy concerns.
(speaking in foreign language)
- [Narrator] Using the phone to pay
isn't a new concept for Huang
since he's one of about 770 million mobile payment users
in China who rely on digital wallets
like Ant Group's Alipay and Tencent's WeChat Pay.
These private tech firms hold data on transactions,
which the government can access.
But because the digital yuan is developed
by the central bank,
there are no third-parties
and that data sits with the government.
(speaking in foreign language)
- [Narrator] To begin testing the digital currency online
and in physical stores,
last year, the Chinese central bank
started dolling out digital cash
through public lotteries in cities across China.
Huang is one of the 750,000 people
who have won some piece of the $23 million prize
in the past year.
To start spending his $30 worth of winnings,
Huang first downloaded the digital yuan app.
(speaking in foreign language)
- [Narrator] It recorded that he spent money
on lunch and medicine one Saturday afternoon
in the southwestern city of Chengdu.
(speaking in foreign language)
- [Narrator] About 10,000 merchants in Chengdu
have signed up to accept digital yuan.
(speaking in foreign language)
- [Narrator] Zhong Jiaying manages a dumpling restaurant
and she said the digital yuan
has some advantages compared with other payment options.
(speaking in foreign language)
- [Narrator] For instance, two of China's
most popular digital wallets charge merchants an average
of .6% for every transaction.
There's also another upside in the works.
The central bank is planning
to make transactions possible
even without an internet connection.
So restaurants like Zhong's won't have to worry
about their spotty connections
that sometimes make it hard to process digital transactions.
- This digital yuan is less about money
and more about data.
- [Narrator] Yaya Fanusie is an adjunct senior fellow
at the nonprofit think tank
Center for a New American Security
in Washington, D.C.
He's been studying digital currencies
for the past six years
and he says China's new currency
is not as anonymous as it claims.
- The central bank has talked
about there being controllable anonymity,
which really means it's anonymous horizontally, right?
The users that are using it don't necessarily know
the identity of everyone that they're interaction with
but vertically, it's not anonymous.
The central bank is at the top
with information on all the users.
- [Narrator] China's central bank has promised
to protect users' privacy.
For now, people can choose whether they want
to use the digital currency.
But the central bank has said
that as the country becomes a cashless society,
it expects the digital yuan to become the primary way
to make transactions.
- The Chinese government could force Chinese companies
to only accept payment in digital yuan,
which would then force the foreign companies,
their foreign counterparts for trade.
It could ensure that they have to use that.
- [Narrator] Central banks have authority
to control money supply
but their actions to restrict a digital currency
would have a more immediate effect,
leaving companies holding that currency
all the more vulnerable.
For example, Fanusie says China's central bank
have put an expiration date on the digital money,
similar to how lottery winnings have to be spent
before a certain date.
- It means that the Chinese government
could set up a whole lot of things
to have your currency maybe valid
or invalid based on its own priorities.
This is almost like handing over the keys
to your business or to your finance department
in some ways
because you really can't control what,
at the end of the day,
may happen with the funds that you're holding.
- [Narrator] While there are privacy concerns,
Fanusie says digital currencies
can create more efficient monetary policy
and counter criminal activities.
China's central bank said its digital yuan system
would help combat money laundering,
gambling and terrorism financing.
(speaking in foreign language)
Meanwhile, the central bank is also looking
into ways to make international transactions possible
in digital yuan.
And Fanusie says there's a big variable
that'll determine if that's going to work.
- Will foreign governments allow their businesses
and citizens to hold digital yuan and use it?
It's not a given that all other countries
are going to transact with this
and because of the privacy, the data issues.
So this is really to be determined.
- [Narrator] While there's no set date
for a national rollout,
some officials have said the digital currency
could be ready for wider use next February
during the 2022 Winter Olympics in Beijing.
- I think there is an element of showing off
for the big international audience.
We have a central bank digital currency
that we're using.
We're the biggest country that's doing it.
- [Narrator] And China isn't alone in this experiment.
According to one survey of central banks,
86% of them from the US to Japan
are exploring these types of currencies.
For early digital yuan winners like Huang,
he says the trial went smoothly
and if the currency does go mainstream,
he expects the surveillance aspect will matter less to him.
(speaking in foreign language)
(lively music)