By Eva Xiao
HONG KONG--China's Commerce Ministry said it would expand a pilot program for its digital currency to include a number of large cities, advancing a pioneering initiative by a major central bank to launch an electronic payment system.
The digital currency pilot program will cover much of China's most prosperous regions, the Commerce Ministry said Friday: the capital Beijing and nearby Tianjin and Hebei province in the north; the Yangtze River Delta to the south; and, along China's wealthy southern coast, Guangdong province and the neighboring cities of Hong Kong and Macau.
Cities in the country's poorer central and western regions that meet certain requirements will also roll out trials of the digital currency, the ministry said, adding that testing efforts were being led by the People's Bank of China, the country's central bank.
There was no timeline for when the expanded pilot programs would begin, though the Commerce Ministry said in a broader statement outlining service sector initiatives--including the digital currency--that the policy design should be completed by the end of 2020.
Earlier this year, the central bank launched a pilot for the digital currency in the cities of Shenzhen, Suzhou, Chengdu and Xiong'an, a satellite city of Beijing--in part, it said, to prepare for the 2022 Winter Olympics in Beijing.
If the new currency, known by its internal shorthand "DC/EP," or "digital currency/electronic payment," is rolled out to the public, it would be the first electronic payment system launched by a major central bank. The PBOC has said that the digital currency now being tested shares features with cryptocurrencies like bitcoin and Facebook Inc.'s Libra, but it will be designed to handle transactions more quickly, making it feasible for wider adoption in China.
Shifting to a government-run digital payment system would help combat money laundering, gambling and terrorism financing, the PBOC has said. The intention is to replace some of China's monetary base--cash in circulation--but the central bank has said the new currency won't replace other aspects of the country's money supply.
Efforts to start testing the fledgling currency have ramped up this year, with Chinese ride-hailing giant Didi Chuxing Technology Co. saying last month it was working with the central bank to test the digital currency on its transportation platform.
Didi, which dominates China's ride-hailing market, said it entered into a strategic partnership with the bank's Digital Currency Research Institute to carry out research and test the application of the new currency, without elaborating.
In Suzhou, where the central bank has conducted internal tests of the new currency, some civil servants have received a portion of their salary in the new currency. Screenshots of the new currency's wallet app, made by Agricultural Bank of China Ltd., have circulated widely online, showing a variety of functions, including allowing savers to track transactions of the new currency and link the wallet to their existing bank accounts.
Chinese officials say consumers, who are accustomed to paying for even small items at convenience stores with their smartphones, are ready to embrace a digital currency that shares features with the current system of smartphone payments. The PBOC has been doing research into a digital currency since 2014.
In Friday's statement, the Commerce Ministry said the government's efforts to encourage innovation, such as broader use of the digital currency and artificial intelligence, are aimed at moving China into higher-value industries and upgrading the country's economy.
Liyan Qi contributed to this article.
Write to Eva Xiao at eva.xiao@wsj.com
