China's Central Bank is attempting to modernize its payment system and looking to fend off any competition from privately issued cryptocurrencies with its first public test of its digital yuan payment system.
The People's Bank of China will be hosting a "Red Envelope" lottery to give away 10 million yuan (US$1.5 million) worth of its digital currency known as the Digital Currency Electronic Payment (DCEP) to 50,000 randomly selected consumers. That estimates to 200 yuan to each winner.
This is part of the digital yuan pilot program that is being conducted in several major cities in China and the first public test of the digital currency. Shenzhen, known for its shopping destinations, is a modern metropolis city in southeastern China that links Hong Kong to China’s mainland.
The lucky recipients to win their Red Envelope containing 200 yuan worth of the digital currency Digital Currency Electronic Payment or DCEP will be able to spend it in Shenzhen's famous shopping destinations and nearly 3400 retail outlets, including Sinopec gas stations, Walmart stores, CR Vanguard Malls, and Shangri-La Hotels. Recipients cannot transfer their red envelope to another person.
China Citic Bank International chief economist Liao Qun believes that this digital renminbi giveaway will increase usage of the digital currency to some extent. Hang Seng Bank (China) chief economist Dan Wang concurs, stating that each yuan given away is likely to generate more sales, citing the multiplier effect. “A back-of-the-envelope calculation would suggest that this 10-million-yuan programme will generate at least 50 million yuan in total demand.
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