Residents who received "red packets" of digital RMB use the money in a store in Shenzhen, Guangdong Province, on October 14, 2020. The city launched a pilot program to distribute 10m yuan ($1.49m) in the form of digital currency to residents on October 12, 2020. Photo: Li Hao/GT

South China's Hainan Province will step up efforts to promote the testing and use of the digital yuan in cross-border trade and financial services as part of its development plan for the Hainan Free Trade Port, according to a five-year plan issued on Tuesday.  

Analysts noted that Hainan may further explore application scenarios of the digital yuan through more overseas transactions and trade, while expanding the ongoing testing of the digital currency within the province. 

The Hainan provincial government released a development plan targeting the local financial industry during the 14th Five-Year Plan period (2021-25) on Tuesday, which emphasized the importance of further promoting the testing and use of the digital yuan. 

The plan highlighted the importance of steadily exploring the offshore financial services sector and gradually cultivating the offshore yuan market in Hainan, while carrying out trials for cross-border payments using the digital yuan and improving the efficiency of payments. 

If the application scenarios continue to expand, overseas visitors may directly exchange foreign currencies into the digital yuan and use it in Hainan for services, travel and duty-free goods, while local residents could purchase overseas products with the digital yuan, Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times on Tuesday.

Wang noted that some banks in Hainan have been discussing the establishment of a free trade account program in the province, which may further connect with the expansion of the digital yuan's use in overseas trade. 

The use of the digital yuan may establish a convenient platform for trading international commodities such as bulk commodities in a point-to-point format, said Wang, adding that transactions could be carried out using the digital yuan in China and a digital currency adopted by the other side, which could reduce losses due to currency fluctuations. 

Hainan will carry out more digital yuan tests and pilot projects in the province and explore more application scenarios that complement the development of the free trade port and establish an ecosystem centered around the use of the digital yuan, said the plan. 

Wang emphasized that Hainan will still place great emphasis on stabilizing and expanding its current digital yuan testing, while further exploring the use of the digital yuan for overseas transactions. 

The plan emphasized that the province will develop a carbon financial market, encourage innovative businesses to develop in the province on a trial basis, and increase support for investment and financing tackle climate change.

Global Times