Chinese province floats new use for digital yuan: paying long-delayed debts
Authorities in Hunan province have suggested China’s digital currency could be employed to clear opaque ‘chain debts’ more easily
China is mulling the application of its digital yuan – the central bank-backed currency also known as the e-CNY – to tackle persistent payment defaults, a move that would broaden the asset’s scope beyond the set of use cases explored by Beijing since the currency’s launch in 2019.
Authorities in the central province of Hunan touched upon the subject when detailing plans to expand the digital currency’s application scenarios and scale, according to a document published last month.
Hunan will “explore using the digital yuan to clear chain debts” through a model where funds can reach the end of the payment chain directly, the document said.
While details at the moment are sparse, analysts suggested the digital currency could be used to ensure the often opaque relationships between payers and payees are more traceable and transparent.
“This could potentially help enhance real-time visibility and control over transactions within the economy,” said Tan Junyu, an economist at global trade credit insurer Coface.
But while the traceability of the digital yuan can help identify and monitor payment bottlenecks, it does not guarantee settlement, he added.
“The core issue remains the repayment capacity of buyers. Without improvements in liquidity or solvency, defaults will persist.”
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