In China, Cash(less) Is King

A traditionally cash-driven economy has made a dramatic shift.

by David Smith

Few would have thought that in the second decade of the 21st century, one of the largest economies on the planet would undergo such a dramatic paradigm shift. But it did.

It was around 7 a.m. in Shanghai, sometime in January 2013, in the heart of the frenetic Chilean cherry season. The market was packed from wall to wall with pallets and pallets of fresh cherries that had just completed their roughly month-long journey from Chile. On my usual morning walk, I strolled past a stall where a deal was being made. A wholesaler from a neighboring city was purchasing a full container (20 pallets, or about 20 tons) to sell on the market, just in time for the rapidly approaching Chinese New Year.

They agreed on a price of about 300 RMB (US$42) for each 5kg (11-pound) box, which equated to around $9 per kilogram at that time, or slightly over 1 million RMB (US$140,000) for the entire shipment. The deal was sealed, and payment was due. The visiting wholesaler handed over a worn apple box filled with large, neatly stacked bundles of 100 RMB notes. Each stack was approximately 25,000 RMB, and there were at least 40 stacks in the box. I was amused but not overly shocked by the transaction. After all, cash is king.

Well…it was. Fast forward just ten years. It was a simple order: a flat white coffee. After I briefly savored the beverage, it was time to leave. I went to the counter to pay, and confused looks followed. I presented the cashier with a bill that she seemed to find alien. Recognizing the bill but unsure of the next step, she reached under the counter, pulled out a little plastic cup stuffed with bills and coins, and started searching for change. There wasn’t enough change in the cup. She had to ask her colleagues for a little extra change, which no one had. In the end, I bought another cup of coffee to go, so she would have enough change for the transaction. That was the last cash transaction for the day. The next customer wanting to pay in cash without exact change would be out of luck. What a difference a decade makes.

The remarkable pace at which China has nearly eradicated cash is staggering. The Covid-19 pandemic expedited this transition, with increasing numbers of people ordering online whenever possible and trying to avoid physical contact when not.

This isn’t confined to coffee shops and online stores — it’s ubiquitous. Anyone with a transaction to make is presented with a pair of QR codes — one for WeChat, a hugely popular Chinese instant messaging, social media and mobile payment app developed by Tencent, and one for Alipay, a third-party mobile and online payment platform. Taxis, street vendors and even beggars have all transitioned to cashless transactions.

Being part of either or both the WeChat or Alipay ecosystems is convenient. Gone are the days of worrying about carrying your wallet or finding an ATM. You can pay for literally anything. I use these apps to pay for utilities, cell phone bills, rent, movie tickets, groceries, restaurant bills, and more.

However, if you’re unable to use these, life is becoming challenging. Visitors from overseas have found it increasingly difficult. More businesses are going completely cashless and can’t accept any other form of payment. Attempting to pay with cash might result in an uncomfortable situation.

Alipay and WeChat have recently promised to simplify the process of adding foreign credit and debit cards to your virtual wallet, but progress has been slow. Some vendors accept them, but only a few have a banking system that accommodates foreign cards. For most shops, people, and businesses, it simply doesn’t work.

This year is becoming a period of catching up, which means that many in our industry will travel more than ever to re-establish and grow our relationships, especially in regions where relationships are key, such as China. For those coming here, it will be best to come at least mentally prepared for the challenges. Make sure you’re registered on the platforms and that your payment methods are set up. They may not work everywhere, but it will be better than nothing.

Undoubtedly, as we steam ahead further into this new decade, China will continue to be an important leader in the digital revolution. The transformation from boxes of banknotes to QR codes and mobile payments is only one example of China’s rapidly adaptable economy and eagerness to be at the forefront of digital innovation. This new era is filled with challenges, but nearly boundless with opportunities. WeChat and Alipay’s efforts to incorporate foreign debit and credit cards indicate a desire to face these challenges. It may take longer than many would like, but that’s the nature of “China Speed” — anything you want to go slowly, goes too fast. Anything you want to go fast, goes too slowly.

So, looking to the future, we must ask: What innovations will be next? How will China continue to be a pioneer in the digital world?, And, perhaps most importantly, as industry leaders, how will it impact my business, and how can I not be left behind? While the answers may not seem clear, one thing is clear: China’s digital revolution will undoubtedly continue to surprise and amaze us.

• David Smith is a produce industry consultant from Washington State who has been living in China for much of the past two decades.