In urban China, cash hardly used
THERE is an audacious economic experiment happening in China. It has nothing to do with debt, infrastructure spending or the other economic topics du jour. It has to do with cash – specifically, how China is doing away with paper money and coins.
Almost everyone in major Chinese cities is using a smartphone to pay for just about everything. At restaurants, a waiter will ask if you want to use WeChat or Alipay – the two smartphone payment options – before bringing up cash as a third, remote possibility.
Just as startling is how quickly the transition has happened. Only three years ago, everyone was still using cash.
“From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China,” said Richard Lim, managing director of the venture capital firm GSR Ventures.
There are certain parts of the Chinese internet that have to be seen to be believed. Coming from outside the country, it’s hard to comprehend that Facebook or Google can be completely blocked until you are forced to do without them. It’s tough to fathom how critical the messenger app WeChat is for everyday life until the sixth person of the day asks to scan your QR code – a sort of bar code – to connect the two of you.
What’s happening with cash in China is similar. For the past three years, I have been outside mainland China covering Asian technology from Hong Kong, which has a different internet culture from the mainland. I knew that smartphone payments were taking over in China, as the statistics were stark: In 2016, China’s mobile payments hit $5.5 trillion, roughly 50 times the size of America’s $112 billion market, according to consulting firm iResearch.
Even so, the cultural shift was graspable only in person. I re- cently moved to Shanghai and felt the change with cash acutely because my first few weeks in the metropolis of more than 20 million were spent cut out of the system. Because of an issue with my bank, I couldn’t immediately link my account to WeChat, which has become a virtual wallet for so many.
I had to navigate China the way I would have three years ago: with red 100-yuan notes.
At coffee shops and restaurants, I held up lines as I fumbled out my wallet and peeled off the bills to give the cashier.
If I had to get somewhere, I couldn’t use my phone to unlock one of the bicycles that are a part of China’s bike-sharing craze.
Even the buskers were apparently ahead of me. Enterprising musicians playing on the streets of a number of Chinese cities have put up boards with QR codes so passers-by can simply transfer them tips directly.
“It has become the default way of life now,” said Shiv Putcha, an analyst with the research firm IDC. “Literally every business and brand in China is plugged into this ecosystem.”