In contrast to many other nations, China has adhered strictly to a zero-COVID policy, resulting in the repeated shutdown and closure of non-essential enterprises in key financial centres such as Shanghai.
Premier Li Keqiang of China convened an emergency meeting with senior Communist Party leaders last week to examine the severe economic effects of the COVID policy.
As a result, twenty of China’s thirty-one provinces have issued “consumer spending incentives,” such as the forthcoming digital Yuan airdrop, in response to economic difficulties.
China is deploying the digital Yuan to encourage demand in its pandemic-ravaged economy, with other uses likely to increase government policy openness and efficacy.
On Monday, Shenzhen began issuing free digital Yuan worth 30 million Yuan ($4.5 million) to stimulate spending and assist businesses. The lottery system would give residents a chance to win 88, 100, and 128 digital Yuan packets.
Before this, the People’s Bank of China had recognised the digital Yuan as a viable instrument for expanding regional economies and enhancing the efficiency of certain financial services.
The airdrop is an effort to stimulate the local economy, which has been affected by the recent lockdowns caused by the COVID-19 outbreak.
Other districts are also working on similar releases, with Guangzhou’s Nansha District supplying digital Yuan to boost the retail and catering businesses.
The repercussions of the lockdown on the local economy have been the subject of much international and domestic concern. The unexpected adoption of the limitations has shaken the crowd, and multiple videos depict folks exhibiting outrage.
The road ahead for Digital Yuan
Experiments with China’s central bank digital currency (CBDC) seem to be doing well. Multiple pilots have already been implemented, and the asset is used in various districts.
Meanwhile, Bitcoin (BTC) and other cryptocurrencies have been prohibited, despite a ruling by a Chinese court that Bitcoin is protected under Chinese law.
Such occurrences may serve as a stress test to determine the feasibility and endurance of China’s CBDC model and how far it can lead the country’s economy in the long run.
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