The People’s Bank of China plans to use its Electronic Digital Currency (DCEP) system to even out competition in the Chinese digital payments market. The plan is to create a strong alternative to tech giants such as Alibaba and Tencent.
A few days ago, PBoC applied to the antitrust authorities to inspect Alipay and WeChat Pay. They were accused of using their top position on the market in order to suppress competition.
Both of these companies report that they expected PBoC to try to dominate the digital payment industry.
Alibaba’s financial subsidiary Alipay and Tencent WeChat Pay currently control most of China’s digital payments. Banks lag far behind competition. In the first quarter of 2020, Alipay processed nearly 56% of all mobile payments in China.
China is currently the most developed country when it comes to introducing CBDC (Central Bank Digital Currency). you can find more articles on this topic here.
The central bank fights for healthy competition
According to information received from several officials familiar with China Central Bank strategies, it intends to use DCEP to provide banks with a level playing field in the field of digital payments.
It is widely believed that Zhou Xiaochuan, the former CEO of PBoC, allowed companies such as Alipay and WeChat Pay to grow into market giants. This happened despite numerous complaints from Chinese banks and the Chinese banking supervision commission.
Public’s Bank of China wants to increase banks’ chances. Digital payments are so dominated by Alibaba and Tencent that banks are unable to thrive in the electronic payment industry. “
Said one senior Hong Kong monetary authority familiar with the matter.
Has China turned against Alibaba and Tencent?
At first, Alibaba and Tencent appeared to be involved in the Chinese CBDC project. However, recent reports from this country suggest that China wants to introduce its digital currency as an alternative and competition for the previously mentioned companies. Therefore, neither Alipay nor WeChat Pay were included in the list of participants in the CBDC project.
On the other hand, some believe that DCEP will not work against Alipay and WeChat Pay, but rather integrate them into the system for faster and smoother digital payments. It should also be noted that Alipay has several patents related to the Chinese digital currency, which proves that the company is still not completely excluded from the game.