China announced that it will distribute digital yuan (e-CNY) to the public in order to support the slowing economy due to the measures against the Covid-19 pandemic and to encourage local spending. It is known that the digital yuan will be distributed in Shenzhen, Guangzhou and Xiong'an New Area.
According to local reports, a lottery system will be set up on Thursday this week where residents of Shenzhen will be able to win red envelopes of 88, 100 and 128 yuan. In this way, China will distribute 30 million digital yuan worth approximately $4.5 million.
The red envelope system, which is frequently used in the Asian region, refers to financial aid given in important situations. China is currently distributing the country's central bank digital currency, the digital yuan, using the red envelope method, aiming to both stimulate local economies and increase the use of e-CNY.
Last week, it was reported that 10 million digital yuan will be distributed in Guangzhou, but a date has not yet been set for this aid to food and retail businesses. According to local sources, distribution of red envelopes is on the agenda in order to stimulate the economy in Xiong'an New Area, southwest of Beijing.
The data reveal that the Covid-19 pandemic has serious effects on the country's economy. China's service and industrial sectors have been at their lowest for more than two years. On the other hand, the Caixin services purchasing managers index (PMI) fell to 36.2 in April, reaching its second lowest value in the survey that started in November 2005. The index dropped to 26.5 in February 2020, which is considered the beginning of the pandemic, pointing to the largest contraction on record.
In his speech last week, Chinese Premier Li Keqiang il called on municipal and rural administrations to accelerate infrastructure projects, increase employment and support development.
Although China has banned the use of all kinds of cryptocurrencies in the country, it is trying every way to increase the use of the technology under its control. Many countries are wary of China's central bank digital currency, citing national security concerns. In the latest developments on this issue, the USA has an attempt to pass legislation to prevent the use of digital yuan within the borders of the country.