The Chinese digital yuan pilot’s expansion to Hong Kong is believed to be driving up cross-border payments, according to media reports. Cross-border payments between Mainland China and Hong Kong, as well as between the mainland and Macau, have reportedly increased tenfold in the past year. While the digital yuan is not the sole factor behind this rise, it is considered one of the key driving forces. The digital yuan is currently only legal tender in Mainland China, as both Hong Kong and Macau have their own separate currencies and economic systems.
However, the central People’s Bank of China (PBoC) has been working on ways to allow Hong Kongers and mainlanders to use the digital yuan for cross-border transactions. One innovative solution targets Hong Kong residents who frequently travel to nearby mainland cities like Shenzhen. These residents can now use the Octopus app, Hong Kong’s most widely used e-pay app, to purchase e-CNY hard wallet cards at self-service card issuing machines located at the Lo Wu border crossing.
This app-card link can be used at various locations throughout the Guangdong-Hong Kong-Macau Greater Bay Area. To incentivize adoption, the PBoC has also offered Hong Kong users discounts of up to 20% at designated retailers. Additionally, Shenzhen has started accepting e-CNY payments from Octopus app users on two of its busiest bus lines, with plans to expand coverage to all bus routes in the future. The PBoC’s Shenzhen branch has already deployed 17 hard wallet card-issuing machines in different parts of the city, issuing over 18,000 CBDC hard wallet cards to Hong Kong residents.
In an effort to drive payments in the opposite direction, Beijing has targeted Mainland Chinese travelers to Hong Kong. Over 200 outlets in Hong Kong now reportedly accept e-CNY payments, with banking platforms allowing merchants to instantly convert central bank coins to Hong Kong dollars. Popular stores among mainlanders, such as Duty Zero by CDF, the IW Hotel in the Kwun Tong district, and the children’s clothing chain Balabala, have all adopted the digital yuan as a payment method.
The digital yuan’s expansion to Hong Kong and its efforts to facilitate cross-border commerce reflect China’s ongoing push for digital currency adoption and its desire to strengthen economic ties between Mainland China, Hong Kong, and Macau. With digital payments becoming increasingly popular worldwide, it is likely that such initiatives will continue to evolve and pave the way for a more interconnected global financial system.