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Central bank reports progress on digital yuan/RMB
No mention of yuan internationalization; not to replace existing mobile payment systems; "small-amount transactions are anonymous & large-amount transactions can be traced according to law";
Update after publication: Upon the feedback from a reader, the first sentence in the second paragraph has been amended from The report does not mention a possible role of digital RMB in the internationalization of the Chinese currency to The report does not mention an overt role of digital RMB in the internationalization of the Chinese currency.
The revision is necessary because the PBoC’s participation in m-Bridge and other int’l cooperation hints at focusing on cross-border transactions and operations, which is the precursor of Internationalization.
Pekingnology today presents a full translation of 扎实开展数字人民币研发试点工作 Solidly Carry Out the Pilot Work on Digital Yuan/RMB R&D published in early October 2022 by the 中国人民银行数字货币研究所 Digital Currency Research Institute of the People’s Bank of China. The article was first published in 《中国金融》China Finance, a bi-weekly of China’s central bank.
The report does not mention an overt role of digital RMB in the internationalization of the Chinese currency, just that PBoC heeds the initiative of the G20 and others to enhance cross-border payments and actively participates in international arrangements.
It promises interconnectedness with China’s existing digital payment instruments - not mentioning any by name, but supposedly mainly the WeChat Pay and Alipay. As repeated in the past, the central bank digital currency wasn’t designed to compete with them - but promises little to no additional cost for consumers and merchants for adopting it.
The report also promises personal information protection in transactions conducted via the digital yuan, citing principles such as "small-amount transactions are anonymous, and large-amount transactions can be traced according to law.”
It was published before the now-concluded 20th National Congress of the Communist Party of China, together with some other de facto reports by various departments within the PBoC. Those were, in effect, official summaries of their work for the past five years - since the 19th Party Congress in 2017. In that sense, the timing was not unusual.
Pekingnology has translated two similar reports from the PBoC and intends to publish more.
Solidly Carry Out the Pilot Work on Digital Yuan/RMB R&D
Since the 19th National Congress of the Communist Party of China, the People's Bank of China (PBoC) has solidly carried out various pilot projects of research and development of the digital Yuan/Renminbi in a down-to-earth manner under the guidance of Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era. It adheres to people-oriented, market-oriented, and law-based principles. After the three stages of theoretical research, closed-loop testing, and open pilot projects, we have helped the digital RMB to find a development path that suits China's national conditions.
Further carry out theoretical research and top-level design
China is the forerunner of the study of statutory digital currency. It carried out a series of research as early as 2014. In 2016, the PBoC established the 数字货币研究所 Digital Currency Research Institute (DCRI) as a financial infrastructure unit to specifically promote the work of digital RMB. In 2018, the PBoC formulated a framework for the research and development of digital RMB as the basic guidance for research and development.
In July 2021, the 数字人民币研发工作组 Digital RMB Research and Development Working Group of the PBoC released a white paper entitled "Research and Development Progress of Digital RMB in China," (ENG) which systematically disclosed the top-level design idea for the first time. That is, under the dual-tier operation system, on the one hand, the central bank ensures its ability to control currency issuance and monetary policy by implementing centralized management; On the other hand, making full use of the existing resources, talents, technology, and other advantages of market entities, dispersing and resolving risks, and avoiding 金融脱媒 "financial disintermediation" through the drive of the market and competitive selection.
While promoting the pilot research and application of the digital RMB, the PBoC continuously strengthened the institutional and regulatory safeguards and improved the protection of personal information. The digital RMB complies with laws and regulations such as the Cybersecurity Law (ENG), Personal Information Protection Law (ENG), and the Anti-Money Laundering Law (ENG). It also ensures the security of personal information through a series of institutional arrangements and technical measures while preventing the risks of illegal and criminal activities.
Smooth progress of the pilot application and scenarios construction
Up to now, the PBoC has selected certain regions in 15 provinces/centrally-administered municipalities) to carry out the digital RMB pilot projects and has identified ten designated operating agencies through comprehensive assessment. The top-level designs, such as the digital RMB’s two-tier operation structure, have passed all-around tests, and their feasibility and reliability have been effectively verified. The open digital RMB ecosystem and competition mechanism not only effectively mobilize the enthusiasm of market entities but also create a good environment for fair competition.
Many repeatable and replicable application models both online and offline for the digital RMB have taken shape in the fields such as wholesale and retail, catering, culture and tourism, education, medical care, and public services of government agencies.
By August 31, 2022, the pilot areas in 15 provinces/municipalities had accumulated 360 million transactions in the amount of 100.4 billion yuan, and the number of stores supporting digital RMB exceeded 5.6 million.
Since 2022, the local governments in the regions with pilot projects have carried out nearly 30 digital RMB consumption voucher programs around the themes of "promoting consumption," "fighting COVID-19,” and "low-carbon travel.” Various market entities have also carried out many market-oriented promotional activities, effectively promoting the recovery of consumption and unleashing the potential for spending.
At the 2022 Beijing Winter Olympics and Winter Paralympics, the digital RMB was unveiled as an important achievement in China's financial and technological development, meeting the mobile payment needs of the spectators and providing safe and efficient innovative payment methods for foreign visitors.
The 碳普惠 (CN) Tan Puhui system, a mechanism (EN) for incentivizing and rewarding lower carbon behavior and purchases, and the green riding activities, both of which are conducted in digital RMB, provided a new starting point for the implementation of China’s "dual carbon strategy." （ENG）
Many online government service platforms have launched digital RMB payment services to support online and offline channels for payment of various public utilities. Digital RMB has been used to extend tax reimbursements, special funds for monthly medical insurance, funds for helping disadvantaged populations, and funds to support specialized and sophisticated enterprises that produce new and unique products.
In addition, the digital RMB service has extended to counties and rural areas, expanding the coverage of rural financial services based in scenarios such as the sales of agricultural products and the provision of subsidies to peasants. That helps the "rural revitalization" 乡村振兴 and the building of 数字乡村 "digital villages."
Continued advance in product R&D and service upgrades
Strengthened the supply of basic infrastructure. The app 数字人民币 "Digital RMB" provides convenient services such as money exchange, payment, and wallet management, and supports online and offline use of digital RMB in all circumstances. We introduced various forms of “hardware wallets,” explored the capabilities of products that integrate software and hardware, and developed corresponding functions for extreme scenarios such as "no Internet" and "no electric power." We gave full play to the advantages of digital RMB, such as high efficiency and low cost, and launched differentiated payment and settlement plans for enterprises and served the development of the real economy.
Explored the application of intelligent products. As fiat money in digital form, digital RMB has the advantages of trust, connectedness, and late-comer advantage in establishing and supporting the ecosystem of smart contract applications, which is conducive to improving the transparency of transactions and the level of intelligentization in fund management, and reducing the cost of settlement and compliance. At present, the digital RMB smart contract has been successfully applied in the fields of government subsidies, retail, prepaid fund management, etc.
Improved barrier-free design for senior citizens. The PBoC has always attached great importance to barrier-free services and has made great efforts to bridge the "digital divide.” (ENG) For digital RMB research and development, the PBoC has stressed the following concepts: practicing inclusive finance and building a digital RMB product system that aligns with the "people-oriented" principle. Barrier-free services were included in the overall planning at the beginning of the product design. Based on the characteristics of digital RMB, the PBoC has put forward the inclusive design concept of "controlling the source, building a system, being expandable, and being accommodating." It has also carried out adaptive changes on both hardware and software products.
Stuck to the bottom line of security. The PBoC thoroughly practices the 总体国家安全观 holistic view of national security (ENG), established and improved a multi-layered security system, and stuck to the bottom line of security throughout the whole life cycle of digital RMB application.
To ensure the future progress in technology, the PBoC did not presuppose a technical route. Instead, it adheres to the concept of long-term evolution, continuous iteration, and dynamic upgrading, adopts the strategy of 竞争选优 optimization through competition, supports the co-existence of dual states, namely, steady state and agile state. The PBoC built its side of the system based on the design principles of multi-site, multi-activity, compartmentalization, distributive, and loosely-coupling. The designated operating agencies selected their respective technical route according to their own needs and technological advantages to ensure that the system meets the requirements of high security, high availability, high expandability, high concurrency, and continuity for various businesses. Since the pilot, the businesses related to the digital RMB have been running smoothly, and there haven't been any major security accidents.
Actively participate in international exchanges and cooperation and establishment of standards
The PBoC actively participated in multilateral and bilateral exchanges and cooperation. It heeded the initiative of the G20 and others to enhance cross-border payments based on the principles of 无损、合规、互通 indestructibility [may be a mistranslation by Pekingnology], compliance, and interoperability, and studied the applicability of the central bank digital currency in cross-border areas.
First, we actively participated in the Multiple Central Bank Digital Currency (m-CBDC) Bridge (m-Bridge) initiated by the Bank for International Settlements and explored establishing a multilateral cooperation mechanism for cross-border payments based on the fiat digital currency and new types of cross-border payment infrastructure and arrangement.
Second, we started the cross-border payment technology test between the Chinese mainland and Hong Kong, explored the interconnection between the digital RMB system and Hong Kong's local "Faster Payment System" (ENG), and supported the settlement needs of residents and businesses in Hong Kong.
Continued promoting the sustainable and healthy development of digital RMB
First, we insist on being people-centered and making good products and services. Taking into account the privacy protection of customers and security & compliance, and following the principle of 小额匿名、大额依法可溯 "small-amount transactions are anonymous and large-amount transactions can be traced according to law,” we fully safeguard the reasonable demand for personal information protection of the general public.
We promote the deep integration and mutual promotion of corporate services and personal services. We support the services to provide convenient fund management, salary payment, purchase, sale, deposit, etc., for small, medium, and micro-sized enterprises.
We support giving full play to the advantages of digital RMB in public services such as treasury, taxation, and government affairs and provide advanced payment services for the government's digital and intelligent governance.
We realize the interconnectedness between the digital RMB system and the traditional digital payment instruments, so that consumers can 一码通扫 “use one single QR code in all circumstances,” and merchants can apply various payment channels without or with little increased costs.
We continue to promote building digital RMB's barrier-free and aging-friendly capabilities and improve the system of standards and regulations for barrier-free products. We continue to deepen international cooperation and sustain in-depth participation in developing international governance in digital currency.
Second, we adhere to the rule of law and rule-based standardization and consolidate the legal and regulatory basis for developing digital RMB. We further improve the relevant laws, regulations, and industry-supporting policies on digital RMB, consolidate the legal basis of digital RMB, and enhance the legal status of digital RMB as legal tender money. We give full play to the role of financial infrastructure, strengthen the coordination of the services, risk control, technology, and security in digital RMB, and firmly safeguard the bottom line of secure operation.
Third, we adhere to market-oriented development and incentivize all parties to cooperate for mutual benefits. On the premise of adhering to centralized management and compliance with the law, market entities are encouraged to carry out promotional activities independently. We utilize the programmability of smart contracts to create an open-source ecosystem. We fully mobilize the enthusiasm of all parties to facilitate their investments, to improve the quality and efficiency of the ecosystem accepting digital RMB. (Enditem)
For more on China’s central bank digital currency, read a speech by respected former governor Zhou Xiaochuan in May 2021
Again: Pekingnology has translated two similar reports from the PBoC and intends to publish more.
The report on interest rate liberalization
The report on China’s macro-prudential policy framework