Using Cash in China

BBC Radio 4 - From Our Own Correspondent Podcast, Cash, Credit and Control in China

"A few weeks ago, I found myself stranded in the centre of Beijing, a city I lived in for 14 years and a place I still consider home, even during a short summer visit. My problem? I had cash in my pocket, but I couldn't use it to pay for any available form of transport.

It was a hot smoggy night, and I was stuck. It was one of my first nights back and I’d received a last minute invitation to meet some old friends at a restaurant that was impossibly far away. But taxis were always available, I reasoned, even in rush hour.

45 minutes later, I discovered a hard truth. Taxis that accepted cash had all but disappeared. I spotted fashionable types sliding into air conditioned cars that had clearly been summoned with a mobile phone. With a mounting sense of dread, I realized I couldn't do the same. I no longer had a Chinese bank account. And that meant I couldn't use my phone to pay for anything. I was locked out of the world of digital payments. I texted my friends for advice...

Hire a bicycle, they suggested jovially. Good idea. Beijing's version of the Boris bike lined the pavements. But that was also out of the question. Again, I needed to be able to make a mobile payment. Bus? No, they didn't accept cash either. The sweatier I became, the more desperate I was to find some kind - any kind of transport. I was just about to hop aboard a bus, ready to plead for another passenger to pay for me and then take my cash when POW, I saw a motor rickshaw. They’re quasi legal in Beijing. Surely the rickshaw driver would take my money. We haggled on a price. We agreed. He swerved through traffic. And then finally I handed over my grubby banknotes. He was horrified. You aren't paying by phone?, he asked. I don't use this anymore, he explained, looking down his nose at my money. No one does. That point became abundantly clear in my first week back in Beijing.

China, the country which invented paper money during the Tang dynasty, starting around 600 AD, had now forgotten its existence. I stopped operations at my local branch of Luckin Coffee, the chain that’s spreading faster than Starbucks across China, when I asked to use cash. They had to find a key and open a special drawer with paper money at the back of the premises. The local farmers market took mobile payments.

Even homeless people in Beijing often have scannable codes to make donations easier. Few things about the pace of change in China surprise me anymore. This is after all, the country that had a life expectancy of 43 years back in 1960. It's at 76 now. I was aware of the rise of contactless payments in the UK, and the relative decline of ATMs that dispense paper money. Many countries are on a predictable path, moving slowly away from cash through the use of checks and then onto cards and digital payments. But China has skipped those middle steps. Mobile payments now make up at least three quarters of all financial transactions.

My inconvenience in Beijing was a minor hiccup. The World Bank estimates that the quick switch to digital payments has left about 200 million Chinese people unbanked. Mostly rural people who are cut off from the larger economy and sometimes can't pay for things they need, because they don't have an account.

No change happens that quickly in China without government consent. The obliteration of paper money is in Beijing's interest, primarily because cash is largely anonymous. Digital payments can be tracked more easily, and they can be taxed, tackling the vast hidden industries that were previously out of the state's reach.

And perhaps most importantly, they eliminate many forms of personal privacy. If one takes a taxi or a rickshaw and pays cash, that's difficult to track. A car ordered by mobile phone looks more comfortable, but the journey will be recorded forever.

At the moment, the vast majority of all mobile payments in China are handled by two Chinese tech companies. But the state will soon nudge into that area too. Beijing announced this week it will release its own digital currency. Users will be able to download the new E-Yuan to so called digital wallets on their mobile devices without ever touching paper money.

The country that revolutionized the concept of money in the Tang dynasty might do so again. During my visit, I repaid one of my young Beijing colleagues for lunch. She took the money from me and folded the notes carefully. I'll keep it for emergencies in case the mobile network ever goes down she said. Do you think that's a possibility?, I asked, sensing she was just being polite. No, she answered. The government won't ever let that happen"