Can China become exclusively a cashless Economy?

Can China become exclusively a cashless Economy?

 A cashless economy implies the use of digital money and electronic transfers in the place of physical notes and coins. More countries are embracing the cashless economy due to the related benefits among them minimal issues of theft and increase accuracy. China has been on the lead in adopting a cashless economy in the world. According to statistics, most of the people that are ranked rich in the country use WeChat and Alipay online money platforms in the place of traditional money ("Wechat & Alipay wallet free recharge, Wechat and Alipay top up in time - Cheap money transfer with Vpayfast," n.d.). The two online money transfer platforms have also been ranked as the most preferred payment options by not only Chinese but also people visiting China. It is expected that digital money transfers are going to take more grounds in China as Alipay and WeChat consolidate their leads and gain more popularity in the country. However, the big question is whether China can become exclusively a cashless economy where all transactions would be done e electronically. Arguably, making China entirely a cashless economy would be impossible due to the associated issues of technology,  Internet connectivity, equitability, the high cost of living, and personal privacy.

 First, a cashless economy exclusively relies on digital technology so that users must have digital devices such as smartphones or smart watches. No doubt, there are still some members of the society in the low social classes that cannot afford the digital devices, which implies that they cannot tap, from the benefits of a cashless economy. Therefore, making China a cashless economy would profit the rich in the s society while locking out people from low social classes from economic transactions. This would be impossible as financial transactions are an essential part of daily life and no one would serve in the absence (Marx, 230-239). It is also important to point out that declaring China a cashless economy would contribute in widening the gap between the rich and the poor, which would have a negative implication on the country’s economic development. This is particularly because the rich would be left to control the economy at the peril of the poor who would almost have nothing to give back to the economy in terms of financial transactions.

 Besides, Internet connectivity would be a critical issue when making China a cashless economy. As noted above; such an economy entirely depends on the digital devices that in turn depend on the Internet. In China, the Internet is not free, and users have to pay for the service. The implication of this is that making China a cashless economy would be costly, as residents would have to pay for the Internet costs besides the transaction costs. Besides, the online money transfers platforms are expensive to set up and maintain (Porter and Michael, 75-78). This is particularly due to the obsolesce nature of technology that would require the online money transfer programs to keep on upgrading their technological infrastructure. It would be expected that such costs are passed down to the consumer in the form of money processing and transfer fee, which would add to unnecessary consumers costs. Eventually, the cashless system would lead to increased cost of living, which would consequently increase consumption expenditure and reduce the propensity to save and invest (Woodford,, 38-43). In the long run, these factors would manifest in determining economic growth and development.

It is also worth noting that China is among the countries that have strict crackdowns and rules regarding Internet usability, which would place limitations in electronic financial transactions. For instance, while in the country; one may not access some foreign websites implying that purchases may not be made directly from the websites (Elizabeth C Economy, 1). Most importantly, Internet connectivity is subject to uncontrollable environmental factors such as weather alongside other technical issues that would cause loss of Internet connectivity. What would happen in such cases where Internet connectivity is lost in major cities due to technical reasons or specific environmental reasons? Obviously, financial transactions would not go through and hence, the economy would come to a standstill. Such economic downturns would not be realised if the country embraced both the cash and the cashless system, as in the event of loss of Internet connectivity or technology breakdown, users would always turn to the physical mode of payment, and no economic gain would be lost.

 As technology develops, so do hackers up their techniques to undertake malicious cybercrimes on financial related digital information. Even though incidences of physical theft are minimal in a cashless society, the likelihood of security breach or loss of privacy is high in such an economy, and besides, the consequences would be higher if a user’s online financial system were hacked than when robbed physically (Choo, 745-747). Ideally, by hacking a user’s banking system, it is most likely that the hacker would drain the entire account yet the user would not have any other mode of transacting considering that they would not be carrying notes or coins.  Thus, a person’s financial life is thus likely to be crippled when such a misfortune occurs in a cashless economy than in case of a combined economy where users can opt for either mode of payment.

 User privacy is also compromised in electronic payment systems. For instance, when using credit cards to make payment, it is possible that the organization in charge gives out confidential information such as login details and or even uses it for malicious activities. Bank attendants can also spy into a client’s login details and connect with criminals for malicious activities. This is because an online payment system lacks anonymity and hence, all the details of the clients including the date, the amount paid and the card number are stored in the database of the receiver. The implication of this is that any intelligence service would have access to the information stored and hence, the client would end up losing their confidential information that may be used to hack into their financial system.

Issues of identity theft have also been reported in online money transfer systems (Choo, 725-731). Such malicious activities do not only hurt the user’s confidentiality but also lay a potential loophole for imposing theft on the users. For instance, criminals could use the client's information on electronic cards to request for loans, make withdrawals, and buy goods and services using the name of the client. Such malicious activities can be avoided by using a cash system where money is received and paid out anonymity without having to leave behind important private details. It is important to note that the issue of lack of anonymity and lack of privacy when using a cashless economy does affect not only the users but also the organizations that are involved with the transfers. This is due to the increased likelihood that organizational details may leak while authorizing such payments. Besides, hackers may take the opportunity of transacting with an organisation to steal vital information by using corrupted electromagnetic cards.

 The question of restrictions regarding the amount of money that can be transacted within a given period using online money transfers may also hinder China from moving to a cashless economy. Ideally, every electronic system has its restrictions regarding the quantity of money that can be transacted within a given duration. For instance, using WeChat Chinese payment system, the daily limit for each transaction performed on a regular basis is 100000 RMB, which is an equivalent of 1500 U.S dollars. Annually, one can perform a transaction limit of 200000 RMB, which is an equivalent of 30000 USD. In case a client chooses to go over the set limit, then they are required to pay using a bank card with some added charges. The bank card also has an expenditure limit that cannot be exceeded without an authorization from the bank ("Wechat & Alipay wallet free recharge, Wechat and Alipay top up in time - Cheap money transfer with Vpayfast," n.d., 1).

Similarly, Alipay, the other major online payment system in China also has its payment limitations. For instance, using the platform, it is required that a single payment transaction does not exceed 500000 RMB. The system also limits daily transaction to a maximum of 500000 RMB and the amount transacted in a whole month to 200000RMB while in offline mode. This is different when the user is in online mode whose limit per transaction should not 300000 RMB. The system is switched to online payment where the consumer exceeds the set limit and they are required to input a password to continue using Alipay. Regarding such limitations, it is certain that the consumer would be at times barred from making desired transactions if they exceed the limit set by the particular platform. Such restrictions would have a negative implication on the involved business organisations and more so on the broader economy of China. However, such shortcomings can be avoided by using the cashless payment system alongside the cash system so that any inadequacies in the cashless system are offset using the cash system of payment ("Wechat & Alipay wallet free recharge, Wechat and Alipay top up in time - Cheap money transfer with Vpayfast," n.d., 1).

 As seen from the discussion, it is certain that China cannot afford to do away with the cash system and adopt a cashless system without affecting its economy negatively. This is due to the inequality that the system will brought forth so that it will widen the gap between the haves and the have-nots. The Chinese economy may also not be supported by the cashless system due to issues of technology breakdown and loss of Internet connectivity. As seen for the discussion, numerous factors affect Internet connectivity among them climate and technical breakdowns, yet the cashless system would not function in the absence of the Internet. Even though the cashless system would contributing to enhancing growth and development of the Chinese economy due to the related convenience, accuracy, and smooth tracking, it is essential to supplement the system with a cash system. This will help counter the negative effects  of a cashless system and avoid issues of the economy coming to a standstill due to the breakdown of the online transfer systems, money transfer limitations, technology breakdown, and loss of Internet connectivity.

Works Cited

Choo, Kim-Kwang Raymond. "The cyber threat landscape: Challenges and future research directions." Computers & Security 30.8 (2011): 719-731.

Elizabeth C Economy. (2018, July 4). The great firewall of China: Xi Jinping's internet shutdown. Retrieved from


Marx, Gary T. "The engineering of social control: the search for the silver bullet." Crime and inequality (1995): 225-246.

Porter, Michael E., and Michael; ilustraciones Gibbs. "Strategy and the Internet." (2001): 63-78.

Wechat & Alipay wallet free recharge, Wechat and Alipay top up in time - Cheap money transfer with Vpayfast. (n.d.) Retrieved from


Woodford, Michael. Interest and prices: Foundations of a theory of monetary policy. princeton university press, 2011.

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