A new guideline for the future development of the Shenzhen Special Economic zone includes the research and promotion of virtual money and the country’s digital fiat currency, according to a report (in Chinese) from state broadcaster China Central Television (CCTV) on Sunday. The Central Committee of the Communist Party of China and the State Council, China’s cabinet, released the guideline.
Why it matters: The guideline shows just how important a digital fiat currency is for China.
- Shenzhen, traditionally known for hardware manufacturing, is becoming key to helping China better implement its Greater Bay Area strategy.
- China’s digital currency/electronic payment system (DC/EP) aims to eventually replace the yuan and is expected to aid the internationalization of its currency.
“We will support digital currency research as well as mobile payments and other innovative applications in Shenzhen. We will also promote interoperability with Hong Kong and Macao financial markets and mutual recognition of financial [fund] products. In the promotion of the internationalization of the renminbi, we will pilot and explore innovative cross-border financial regulations.”
— Guidelines issued by the Central Committee of the Chinese Communist Party and the State Council (our translation)
Details: The guidelines aim to make Shenzhen “a pioneering area of socialism with Chinese characteristics.”
- Research of the digital currency, as well as fintech applications including mobile payments, will be supported in the city. The guideline did not provide more details regarding what digital currency research will be carried out by the local government.
- China will also push forward the reform of the registration system of the ChiNext board, a Nasdaq-style board of the Shenzhen Stock Exchange, which was set up to attract innovative and fast-growing enterprises.
- Other cutting edge sectors including 5G, artificial intelligence, cyberspace technology, and biomedical technology will also receive support from the city.
Context: Despite its hard stance against cryptocurrency, China’s central bank has been boasting about the development of its DC/EP system.
- Mu Changchun, deputy chief of central bank’s payment and settlement division, said at a forum in early August that China’s planned digital fiat currency is “nearly ready” for release after five years of research and development.
- Shenzhen became the country’s first Special Economic Zone in 1980. Companies in the area are subject to less red tape and fewer regulations. There are also taxation and other incentives that aim to attract foreign investment.