Pilot programs of China's central bank digital currency will soon start in selected regions, including Xiongan New Area in Hebei province, focusing on consumption scenarios such as catering and retail sales, according to media reports.

A number of enterprises in Xiongan, including cafes, restaurants, bookstores and hotels, have joined the trial, working with State-owned banks and leading internet companies to test the country's first digital version of renminbi issued by the People's Bank of China, the central bank, the reports said.

Local government employees in Xiangcheng district of Suzhou, Jiangsu province, whose salaries are paid through accounts in the country's "big four" banks－Bank of China, China Construction Bank, Agricultural Bank of China and Industrial and Commercial Bank of China－have been asked to install "digital wallets "on their cellphones this month, according to the local government.

A part of their salaries will be paid in central bank digital currency starting from May, the notice said.

A report from Sichuan Newsnet said that more plans of the trial in Chengdu, Suzhou and Shenzhen are expected to debut before or after the May Day holiday. Chengdu will apply the digital currency in online and offline consumption activities, Xiongan will mainly use it in clearing services, while in Shenzhen, bank employees will pay taxes with the digital currency, said the report.

The digital currency research institute of the PBOC confirmed earlier this month that China has started testing its government-backed digital currency in some regions before it is introduced to the public.

"Compared with paper notes and coins, the digital currency can cut issuing costs, such as expenses on printing, transportation and management," said Dong Ximiao, a researcher at National Institution for Finance and Development.

The digital renminbi will replace part of cash in the future but will not eliminate all banknotes soon. "Paying with cash and digital currency will coexist for a long time," said Dong.

Payments via the upcoming Chinese sovereign digital currency could be contactless and the transaction can be achieved when two mobile phones with electronic wallets get close to each other, Mu Changchun, head of the PBOC digital currency research institute, said earlier.

Different from the existing electronic payment methods, such as Alipay and WeChat Pay that rely on the internet, digital currency can be exchanged offline when two cellphones get close to each other, said Mu.

China could be one of the leading countries in the world to have a retail-based central bank digital currency, said analysts.

The PBOC started research on its digital legal tender in 2014. The State Council approved the PBOC's digital currency development program at the end of 2017, jointly with some qualified commercial banks and institutions. The central bank called the new money as "digital currency and electronic payment".

Peng Wensheng, chief economist with Everbright Securities, said that once the regular delivery channels of the central bank digital currency are opened, more people will take the new money, and it may compete with existing electronic payment tools.

"If businesses do not need to pay any fee for using the digital currency, it will take some of the market share of Alipay and WeChat Pay. In the future, digital money issued by the central bank is likely to compete and compliment the private sector's electronic payment platforms," said Peng.

The digital currency trials now are being conducted in a "closed environment" and not connected to the existing sovereign currency issuance and circulation system, according to a senior official from the PBOC's institute, who did not want to be identified.

Cang Wei in Nanjing contributed to this story.