Changshu, a subordinate city to Suzhou in the eastern Jiangsu province, will pay civil servants and other state sector employees salary in digital yuan from May, state media Securities Times reported on Sunday.
"The development marks the latest trial China is doing to promote its e-CNY," said Dan Wang, chief economist at Hang Seng Bank China, referring to the digital yuan.
China has been a leader among countries that are developing the CBDC - digital tokens issued by central banks, although adoption is still in the early stages.
Shares in Global Infotech Co soared 13% by midday, Chutian Dragon Co surged 8%, while Newland Digital Technology Co and Northking Information Technology Co also rose.
In contrast, the benchmark index slipped 0.4% amid lingering concerns over China's economic recovery.
"Using e-CNY to pay salaries will help popularise the digital currency," said Wang Pengbo, senior financial analyst at consultancy BoTong Analysys.
A person in a public school in Changshu said she had been receiving transport subsidy in e-CNY since October. Two other state sector employees in other parts of Suzhou said they had been receiving e-CNY as salary since last year.
However, the three people all said they don't find adequate scenarios to spend the digital yuan in their daily life.
"Once I receive my salary in e-CNY, I always immediately covert it to traditional yuan," said Yang, a doctor working in a Suzhou hospital.
"I don't know how to use it, to be honest, no merchant around me receives digital yuan," Yang told Reuters, only giving her surname as she is not authorised to speak to the media.
(Reporting by Jason Xue and Li Gu in Shanghai, Tom Westbrook in Singapore; Editing by Muralikumar Anantharaman)
