This isn’t the kind of article that I tend to write, but I stumbled across an article on the BBC this morning and thought it was important enough to share with the community just in case anybody missed it. I don’t want to be accused of plagiarism (which is against community standards) so I have provided a short summary (gleaned from the article) and then a personal reflection, based on my own analysis at the end. I also encourage you to read the article for yourself to get the full picture. The link has been provided in the references section.
- The Chinese state have created a powerful new payment system known as Digital Currency Electronic Payment (DCEP) that utilises blockchain technology
- DCEP is closely tied to the Chinese yuan and in fact could be described as a digital version
- It is anticipated that it will become the dominant global currency – reading between the lines that means even replacing the USD
- Its growth will be fuelled by the massive Chinese population and in particular the Chinese diaspora who amount to 30m people. This will make it a go to protocol especially for international transactions
- As with other Chinese technologies (eg Huawei) some worry it can be used as a further means to enable state spying on its citizens and consequently any or all who use DCEP
- In its utilisation bank cards will be linked through DCEP electronic wallets for day to day use in regular transfers and other transactions
- A driving force behind DCEP is that the Chinese want to take control and do not want risk a global digital currency emerging elsewhere. The article cites Facebook’s LIBRA as an alternative looking to achieve the same ends.
- The successful global adoption of DCEP with also internationalise the yuan and put it on the same stage as the USD and a real world competitor
- DCEP is just one of a few methods China is using to get ahead of the game and according to the writer China is already far ahead of even the US
My View
DCEP already looks like it is going to be a serious player in the market and it is a logical next step for China, who now has world dominance when it comes to manufacturing (wait till they start building half decent cars!) to move more decisively into the financial sector. Competition of course is always good for the consumer and what is really impressive about DCEP is that it already has a market and real world applications.
However, we should be cautious. China is the world’s most populous state (which can drive growth), but also a totalitarian one. Many are concerned with how China is utilising tech as another means of both repression and data collection. Just look at the recent issues with Huawei who now have been effectively banned from building the UK’s 5G network. Does the world really want a technology which can be used to further the aims of a repressive regime such as that we see in China?
Also, there are many who believe that as a consequence of the Corona virus pandemic there needs to be accountability. The fact is that China, as the first country with Corona and then the first country to come through the other side, is finally poised to take advantage of these uncertain economic times that have come about as a direct result of the pandemic. I am no conspiracy theorist. I think that Corona did emerge on a Chinese market that may or may not have been connected with a combination of bad food hygiene in close proximity to a virology lab that may have had an accidental breach. This of course is all highly speculative and we will probably never know.
What however is true though is that while the rest of the world is weakened, it presents an opportunity that the Chinese would be foolish not to exploit.
The rest of the world may not allow this though and turn its back on China, especially if ‘Trumpism’ continues to flourish (let’s see what happens in November). DCEP with its likely ambiguous application and a reaction to Corona may not even get off the ground.
I suppose it comes down to a question of does China need the world more than the world needs China.
