China’s Shift to Digital Payments
China has undergone a significant transformation in its payment systems, with a notable shift from paper money and coins to digital payment methods. This change is second only to the country’s extensive adoption of electric vehicles (EVs). The use of cards or phone apps for payment has become the norm for purchasing products or paying for services.
Digital Payment Methods in China
In China, Alipay and WeChat Pay are the two major apps used in most transactions. These apps are widely accepted, and many international cards, including VISA, are also recognized. The national currency is the yuan or renminbi (RMB). While paper money is still accepted, its use is declining, and many businesses prefer digital payments. In fact, China’s central banks require businesses to continue to accept paper money, but in practice, many people, especially in urban areas, use digital payments exclusively.
Rural Areas and Digital Payments
However, in rural areas, some elderly individuals still use cash, and small street stalls might not have digital payment capabilities. Nevertheless, even in rural areas, the use of digital payments is increasing. For example, farm vendors are now using QR codes to sell their products, and customers can pay using their cellphones.
Comparison with the US
In contrast to the US, where cellphone costs are high, and coverage can be limited, China’s cellphone costs are dramatically lower, and nationwide coverage is greater and cheaper. This is because China does not allow multiple cellphone companies to set up separate towers, reducing waste and costs. As a result, virtually all adult citizens in China, except the rural elderly, have had cellphones for the last two decades.
Central Bank Digital Currency (CBDC)
China promotes the use of a central bank digital currency (CBDC) for transferring digital payments. The digital yuan is a form of electronic money that is different from cryptocurrency, which can hide the identities of participants and promote anonymous transfers of money. The use of CBDCs provides a secure and transparent way to make digital payments.
Global Trends
According to the International Monetary Fund, other countries, such as Sweden, Norway, and South Korea, are also becoming cashless. Sweden is likely to become totally cashless by the end of 2025. However, in Western countries, there is a higher risk of online fraud and exclusion of businesses and institutions that have not yet integrated with online payment systems.
Impact on Math Skills
The shift to digital payments may have an impact on math skills, particularly in the US. As digital payments become more widespread, there is a risk that students will lose the ability to count and perform basic math operations. This is because digital payments often involve automatic calculations, reducing the need for manual math. However, in countries like Singapore, Sweden, and China, math education remains strong, and the shift to digital payments has not had a significant impact on math skills.
Conclusion
In conclusion, China’s shift to digital payments is a significant trend that is likely to continue. While there are benefits to digital payments, such as convenience and security, there are also potential drawbacks, such as the impact on math skills. As the US considers moving towards more electronic payments, it is essential to weigh the pros and cons and ensure that the transition is smooth and beneficial for all. By learning from China’s experience and other countries that are becoming cashless, the US can create a payment system that is efficient, secure, and promotes financial inclusion.
