China’s society is going cashless. Now its central bank is pushing back
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China’s push towards creating a cashless society is meeting some resistance from the country’s central bank. Late last year, the People’s Bank of China(PBOC), the country’s central bank, fined 16 public and private organizations for refusing to accept cash payments, the bank revealed in a statement last week.
The central bank’s action was aimed at maintaining the circulation of China’s paper yuan currency and to “protect the rights of the public to use cash,” the PBOC said. The bank said it fined organizations between 500 yuan ($77) and 500,000 yuan ($77,236) for taking “discriminatory” or “inconvenient” measures to deny customers the right to use cash. The violators included Chinese insurance giant Ping An, several property management companies, a public park in Beijing, and 13 other public and private institutions across the country. (The PBOC did not explain the discrepancy in fine size.)
China is fast becoming one of the most cashless societies in the world, fueled by the rise of dominant fintech platforms like Tencent’s WeChat Pay and Alibaba’s Alipay. In many cities across China, it has become increasingly difficult to hail and pay for a taxi, buy groceries, or even settle a bill at a restaurant without access to a mobile wallet.
China’s reliance on digital tools for daily tasks only intensified during the pandemic, as city and municipal governments across the country launched color-coded contact tracing apps that citizens must display to enter public buildings and ride public transportation.
But the digital evolution has also left behind tens of millions of people who lack the access or knowhow to navigate China’s Internet-based economy.
In August, the story of an elderly man forced off a bus in northern China for not displaying a health code app went viral. In November, a similar story went viral: an elderly woman in China’s Hubei province was told she couldn’t pay for her health insurance with cash.
The stories helped prompt action at the top levels of China’s government. In December, the State Council, China’s cabinet, called on businesses and local government authorities to accept cash payments and create alternatives for health codes apps so seniors could better navigate the digital divide.
Governments elsewhere are also pushing back the against the cashless movement with equity in mind. In 2019, Philadelphia became the first major U.S. city to force shops to accept paper and coin currency. But the PBOC’s effort stands out since it’s carrying out its crackdown on cashless institutions as it spearheads an effort to create the world’s first central bank-backed digital currency. Starting in 2020, the bank has rolled out digital yuan pilot programs through lottery-style giveaways and by partnering with local businesses in cities like Shenzhen and Suzhou.
China’s central bank action against institutions that fail to accept cash comes as the government works to limit the power of the country’s largest digital payment operators. In November, Chinese regulators halted the IPO of Ant Group, the Alibaba affiliate that operates Alipay, after Alibaba and Ant Group founder Jack Ma challenged the entrenched interests of China’s financial system. The People’s Bank of China is also now drafting antitrust rules aimed at curbing the power of digital payment operators like Alipay and WeChat Pay.