Analysis of China’s Digital Payment and Currency Structure Changes

The research examines how digital payments affect China’s monetary structure and currency demand. The popularity of digital payments reduces precautionary and transactional money demand, reduces cash and demand deposits in circulation, and increases the velocity of money circulation, thereby affecting the money supply structure. Empirical analysis shows that digital payments negatively correlate with precautionary currency demand; there is also a negative correlation with transactional currency demand. The rapid development of digital payments positively affected money multipliers and money supply flows. However, this development also made it more challenging for central banks to implement monetary policies. Therefore, it is suggested that central banks need to improve statistical methods to adapt to the changes in the monetary structure brought about by digital payments. Digital payments have developed rapidly and become popular, accelerating the flow of money, speeding up the conversion of money at different levels, and reducing the demand for precautionary money and transactional money. It reduces the money supply at the M0 and M1 levels with higher liquidity, thus promoting the increase of the money supply flow scale in general. The changes in the money supply and demand structure caused by digital payments increased the difficulty for the central bank to implement monetary policy regulation to a certain extent. It is necessary to accurately count the scale structure of digital payments and various financial instruments within the system. © 2025 Elsevier B.V., All rights reserved.