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China is to give state employees digital currency, as part of a pilot scheme ahead of the introduction of its central bank digital currency (CBDC).

The so-called “digital yuan” has been in development for some time, with the project now reported to be nearing the final stages of testing and development. The announcement of the scheme is only the latest step forward, as China moves towards a wider rollout of the digital currency.

The scheme will see government employees in Suzhou paid 50% of their travel subsidies for May in digital currency. The payments will be facilitated by four state-backed banks, the Agricultural Bank of China, the Industrial and Commercial Bank of China, the Bank of China, and the China Construction Bank.

The Agricultural Bank of China has already undertaken its own pilot of digital currency, with a number of its own employees assigned wallets and paid in digital currency.

Local government agencies have also been invited to work with the participating banks to develop systems ahead of May, in order to deliver a smooth rollout of the pilot scheme. Each bank will offer users a digital currency wallet, which will be topped up with the digital currency subsidy over the trial period.

The trial in Suzhou joins a similar trial in Shenzhen, with the two cities specifically chosen by Chinese authorities as test cases for the digital currency. Should the scheme play out successfully, it is expected to be extended further across China in incremental steps towards a nationwide rollout.

News of the pilot comes at a time when central banks around the world are researching CBDCs and the feasibility of launching their own digital currencies.

China has partnered with a number of local tech companies in developing its digital currency, including Alipay, the payments subsidiary of ecommerce giant Alibaba. Alipay has already registered at least five patents covering digital currency, as a result of its work on the digital yuan.

It follows earlier announcements that the People’s Bank of China had already finished building the basic structures of its digital currency, leading central banks worldwide in the development of a CBDC.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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