China Expands Digital Yuan to Free Trade Zones

China is expanding its digital yuan project, starting with its free trade zones. On June 4, officials at the People’s Bank of China (PBOC) announced the expansion of financial innovations tied to its Shanghai Free Trade Zone, including broader applications of the digital yuan. Ji Min, head of the PBOC’s Research Bureau, stated that the country will expand the “Shanghai model” and “deepen financial openness and innovation” within the zone. This policy will also be applied to other free trade zones across the country.

Specifically, China will promote the use of the digital yuan within these zones. Additionally, the country is taking steps to optimize electronic payment systems nationwide. However, the PBOC has yet to announce any official plans for a full national rollout of the digital yuan. This move aligns with broader policy trends, as regulators also discussed expanding the pilot project to additional regions at the recent Lujiazui Forum.

China currently has 21 free trade zones, primarily located in coastal provinces. These zones offer favorable incentives for foreign investors and simplified procedures for obtaining business permits. They also serve as testing grounds for regulatory innovations, including central bank digital currencies. In many cases, regulations trialed in these zones are later adopted nationwide.

By 2024, the digital yuan will have registered over ¥7.3 trillion in transaction volume across pilot regions. Additionally, over 180 million individual wallets have been created. Early testing began in major cities, enabling citizens to transact via digital wallets developed by the PBOC. The expansion of the digital yuan to other free trade zones is a significant step in China's digital currency strategy. It aims to promote the use of the digital yuan in domestic and international transactions, thereby increasing its acceptance and usage. The digital yuan is designed to be a stablecoin, backed by the Chinese government, which provides a level of security and trust for users. This move is also seen as a way to challenge the dominance of the US dollar in digital payments and to promote the internationalization of the yuan.

The digital yuan is part of China's broader strategy to enhance its financial infrastructure and to promote the use of digital currencies. The digital yuan is designed to be a stablecoin, backed by the Chinese government, which provides a level of security and trust for users. This move is also seen as a way to challenge the dominance of the US dollar in digital payments and to promote the internationalization of the yuan. The digital yuan pilot program in Shanghai has been successful, with trials conducted in major cities enabling citizens to transact via digital wallets developed by the PBOC. The expansion of the digital yuan to other free trade zones is a significant step in China's digital currency strategy. It aims to promote the use of the digital yuan in domestic and international transactions, thereby increasing its acceptance and usage. The digital yuan is designed to be a stablecoin, backed by the Chinese government, which provides a level of security and trust for users. This move is also seen as a way to challenge the dominance of the US dollar in digital payments and to promote the internationalization of the yuan.