China pushes Shanghai's digital yuan model to national free trade zones

The People’s Bank of China is taking steps to expand its digital yuan project, starting with its free trade zones.

On Friday, June 4, officials at the People’s Bank of China announced the expansion of financial innovations tied to its Shanghai Free Trade Zone. Notably, this includes broader applications of the digital yuan.

Ji Min, head of the PBOC’s Research Bureau, stated that the country will expand the “Shanghai model” and “deepen financial openness and innovation” within the zone. Simultaneously, the central bank will apply these policies to other free trade zones across the country.

Specifically, China will promote the use of the digital yuan within these zones. Additionally, the country is taking steps to optimize electronic payment systems nationwide. However, the PBOC has yet to announce any official plans for a full national rollout of the digital yuan.

The move aligns with broader policy trends. At the recent Lujiazui Forum, regulators also discussed expanding the pilot project to additional regions.

Chinese digital yuan to expand

Currently, China has 21 free trade zones, primarily located in coastal provinces such as Shanghai, Fujian, and Hunan. These zones offer favorable incentives for foreign investors and simplified procedures for obtaining business permits.

They also serve as testing grounds for regulatory innovations, including central bank digital currencies. In many cases, regulations trialed in these zones are later adopted nationwide.

By 2024, the digital yuan will have registered over ¥7.3 trillion (approximately $1.02 trillion) in transaction volume across pilot regions. Additionally, over 180 million individual wallets have been created. Early testing began in major cities like Shenzhen and Beijing.