Thread, by request
1) Currently, each mainland China citizen must carry an ID card (身份证) with a unique ID number and personal information; current generations feature chips and encryption.
2) In 2015/2016, various agencies including the Ministry of Public Security began to show interest in virtual versions of the national ID card, which is used to open bank accounts, check into hotels, purchase high speed rail tickets, etc.
3) Interest by Chinese authorities resulted in numerous pilots with WeChat (Tencent) and Alibaba. A program in Wuhan had over 400K residents back in 2016; in Nansha, Guanzhou a virtual ID program was also launched.
4) Since China is an extremely aggressive adopter of digital payment technologies with high penetration rate, digital IDs are a natural progression. Potential applications, including use in social credit system, are far ranging.
5) Digital IDs can be thought of as a step towards the “digital economy”; they represent an essential building block. Similarly, China’s pending central bank currency is another important step in the “digital economy.”
6) In our view, it is likely that digital ID development will take on added importance with China’s digitized M0.
7) After President Xi’s blockchain announcement, interest in the technology has exploded. He gave examples of opportunities to integrate blockchain technology, including the provision of public services, food safety, smart cities etc.
8) While DCEP has its own strategic importance, in our view the ID digitization is part of a holistic push to digitize the economy. ID digitization is a precursor to some of the other applications outside of DCEP, particularly government services.
9) A digital ID would facilitate streamlining the process of digitizing services like pensions, education services, social assistance and what Xi referred to as “precision poverty alleviation”.
10) As for DCEP, smaller transactions are anonymous with larger transactions requiring more verification, culminating with in-person identification at their commercial bank. It may be possible, and even desirable to integrate digital ID, but no details have been released yet.
11) Bank accounts are already linked to ID cards in China so in theory if the digitized card is verified on both ends registration could be done remotely. Whether in person is preferred for security reasons is another question.
12) In summary, this is the latest in a series of initiatives China is undertaking to digitize its economy, and it will be interesting to see how these innovations will integrate together.
13) It is difficult to understate the value of the synergies created by digitizing an economy; currency, ID, public services etc., as well as the privacy concerns that might arise. It will be interesting to see how this develops and what aspect of life in China is digitized next.
