China’s Latest Economic Experiment- National Digital Currency

“New York Times”: China’s latest economic experiment-the national digital currency

The pilot of digital renminbi has been extended to Beijing, Shanghai and other places. Unlike decentralized cryptocurrencies such as Bitcoin, the national digital currency created by the central bank will give the government more financial control.

 

Recently, Annabelle Huang received a red envelope from the government by drawing lots to have the opportunity to try China’s latest economic experiment: the national digital currency.

 

Annabel Huang, 28, is a Shenzhen-based business strategist. After signing up for lottery through the social media program WeChat, she received a red envelope worth 200 yuan (or eCNY) (approximately $30).

To spend it, she went to a convenience store near the office and bought some nuts and yogurt. Then she opened a QR code for the digital currency from the mobile bank, and the store scanned the code to receive the payment.

 

Annabel Huang talked about the experience of using digital renminbi, saying that it is “very similar to the payment method” of other Chinese payment apps. However, she added that the payment process was not so smooth.

 

China has taken bold actions to reshape the government-supported currency operation and launched its own digital currency, which is different from cash and digital deposits in nature.

According to the government, the People’s Bank of China began piloting digital renminbi in four cities last year, and recently expanded the scope of the pilot to larger cities such as Beijing and Shanghai.

 

Central banks all over the world are experimenting with new forms of digital currency. This new type of digital currency can circulate faster, allowing even the most vulnerable groups to use online financial tools.

When cryptocurrencies such as Bitcoin have recently skyrocketed in value and become more popular, many countries have already taken action.

Chinaese Digital Currency

However, although Bitcoin is designed to be decentralized so that no company or government can control it, the digital currency created by various central banks has brought more financial control to the government.

These currencies can be issued directly with expiration dates, and if they are not used before a certain date, these currencies will expire. And these currencies can make it easier for the government to track financial transactions to prevent tax evaders.

 

According to the Bank for International Settlements (Bank for International Settlements) data, in the past 12 months, more than 60 countries have experimented with national digital currencies, slightly higher than the more than 40 a year ago.

These countries include Sweden, which is currently testing the digital crown, and the Bahamas, which has provided all citizens with the digital currency “Sand Dollar.”

 

In contrast, the United States is slow to act and only conducts basic research. Last week, at an event in The New York Times, Treasury Secretary Janet L. Yellen (Janet L. Yellen) said that the situation may change. She said that the US digital currency is “definitely worth studying” because “it can bring To make payments faster, safer and cheaper”.

However, no major country has gone further than China. Its early actions may herald the trend of digital currencies in other parts of the world.

 

“It’s not just a question of money.” said Yaya Fanusie, a researcher at the Center on Economic and Financial Power think tank and author of a recent paper on the digital renminbi. “It’s about developing new tools to collect data and use these data to make China’s economy smarter and based on real-time information.”

 

Although the Chinese government did not disclose if and when the digital renminbi will be officially launched nationwide, several officials mentioned that it is necessary to make preparations for the use of the currency by visitors to the 2022 Beijing Olympics.

In articles and speeches recently published by officials of its central bank, the People’s Bank of China, they all emphasized the project’s ambition and desire to become the number one.

 

“The right to issue and control digital currency will become a’new battlefield’ for competition among sovereign nations,” wrote an article in the Central Bank magazine “China Finance” in September. “China’s issuance of legal digital currency has many advantages and faces many opportunities, and it should accelerate to seize the first track.”

The People’s Bank of China did not respond to a request for comment.

 

The development of the national digital currency began in 2014. Soon after Bitcoin attracted attention in China, the People’s Bank of China established an internal team to conduct research. In 2016, the central bank created a department called the Digital Currency Institute.

Research by Sino Global Capital, a financial investment company, shows that last year, China began piloting digital renminbi in cities such as Shenzhen, Suzhou, Xiong’an, and Chengdu.

 

An official of the People’s Bank of China stated that the design of the digital renminbi only borrowed a few technical elements of Bitcoin and did not use the so-called blockchain technology that most cryptocurrencies rely on. Blockchain is a ledger system.

The recipient only has a few weeks to spend, and then these digital currencies will disappear, which shows its unusual nature. So far, only a few retailers accept this currency.

But early users said that this experience is very similar to Chinese digital payment methods such as Alipay and WeChat Pay. If it is promoted across the country, it will not be difficult to switch to this payment method.

 

30-year-old Gao Yifan (sound) is a financial analyst in Shenzhen. Not long ago, she bought snacks at a 7-11 convenience store with 200 yuan digital renminbi. “I can completely accept digital renminbi as it is enough Fast and smooth enough,” she said.

 

Gao Yifan also said that digital renminbi will only become mainstream when people can send it to friends, and the trial version cannot do that.

 

Eswar Prasad, former head of the China Department of the International Monetary Fund, said that one of the most important factors driving the digital renminbi is the success of WeChat Pay and Alipay.

 

“The digital renminbi is actually a defense mechanism to maintain the important position of central bank funds,” Prasad said.

 

If the digital renminbi succeeds, it will give the central bank new powers, including a new type of monetary policy to help economic growth. Economists have discussed the possibility that the central bank can program the digital currency to slowly depreciate, thereby encouraging consumers to consume immediately.

 

Some economists say that China’s digital currency will also make the yuan more likely to compete with the dollar as a global currency because it can flow internationally with fewer obstacles. But Chinese officials and analysts say many other changes are needed to achieve this goal.

 

In addition to these ambitions, the digital renminbi can immediately give the government more power to monitor the flow of funds because the system can record every transaction.

 

Source Credit: New York Times

 

 

China is accelerating its digital currency, but the US media ridiculed it, and was slapped in the face soon

In recent years, with the continuous development of Internet technology, mobile payment has become one of the most widely used payment methods in China. China is accelerating the promotion of digital currency. This action by China has attracted the attention of Western countries.

The US Consumer News and Business Channel reported on February 27 that American think tank expert Kemp posted on the media that if the United States wants to defeat China’s financial system, it needs to promote the development of a digital dollar as soon as possible to fight China’s digital renminbi.

The American media began to mock China again.

 

 

China intensifies its efforts to promote the development of digital RMB

Kemp pointed out in the article that China is now accelerating the promotion of digital renminbi. At present, China’s digital currency technology is far ahead of other countries in the world.

The reason why China wants to quickly promote the development of the digital renminbi is actually to weaken the position of the US dollar in the world, and thereby expand the influence of the renminbi.

 

Compared with traditional paper money, digital currency is more environmentally friendly and more convenient. China has been accelerating the promotion of digital currency in recent years, which is also a manifestation of China’s scientific and technological development.

However, the US think tank experts have raised this to the height of strategic security and started again. Propagate the China threat theory in disguise.

 

The U.S. intends to accelerate the development of the digital dollar

The author mentioned in the article that now the United States does not seem to intend to accelerate the development of digital dollars, but before the US Treasury Secretary Yellen and the chairman of the Federal Reserve have formally announced at the end of February that relevant institutions in the country will decide whether to use digital dollars.

Yellen admitted that the United States still lacks financial inclusion. Nowadays, a large number of Americans do not have convenient payment and bank accounts. The development of digital dollars can solve this series of problems.

It believes that the digital dollar is a safer and lower-cost payment method, which also means that US officials have begun to pay attention to this problem, and the development of the digital dollar may be accelerated in the future.

 

America gets slapped in the face

Although the United States has begun to attach importance to the development of the digital dollar, US officials seem to be unaware that China is far ahead of other countries in the field of digital currency, and the digital renminbi may be unveiled at the Beijing Winter Olympics.

 

There is no doubt that if the United States does not accelerate the development of the digital dollar, the United States will lose its dominant position in the field of digital currency, but as the world currency, if the United States blindly develops the digital dollar without detailed planning, it will also affect the world financial system. Regardless of whether the United States will accelerate the development of digital dollars, there is no way to change China’s leading position in digital currency technology. This also reflects that China has begun to surpass the United States in some areas after hiding its power and biding its time.

 

A number of technologies are left behind by China, using digital currency to overtake? American media thinks too simple

With the development of global multi-polarization, China has also emerged on the international stage, and its development in some fields is relatively advanced, and many technologies have surpassed the United States. However, the US media has always been reluctant to recognize China’s development. A few days ago, the US media published an article saying that the US can completely surpass China in terms of digital currency. Is it really as simple as the US media said?

The American media’s ideas are too simple, and many problems need to be solved to surpass China.

On February 27, local time, CNBC published an article saying that the United States can “surpass” China in terms of digital currency. But the current digital currency development in the United States may disappoint these American media.

US Treasury Secretary Sokin is still at the level of whether the development of digital currency is good for the United States. At least 70 countries in the world have already introduced related digital currency projects. This is the gap.

The U.S. media did not realize that the U.S. wants to surpass China in terms of digital currency, and it needs to solve several difficulties. The first is that there is a difference in execution speed.

China has already begun work on digital currency, such as establishing a trade agreement with Mauritius, developing a financial testing ground; establishing a cooperative relationship with the cross-border payment system SWIF, etc. These are China’s efforts in digital currency, but the United States’ The digital currency process is still verbal, these are the gaps.

The second is that no ally is willing to stop and wait for the United States. It seems unlikely that the United States wants to go hand in hand with its allies in the digital currency process.

Some allies of the United States have also put forward their own digital currency implementation plans, but the United States has not yet started, so their process is different. They cannot stop and wait for the United States, let alone share digital currency technology with the United States. And results.

Second, a stable financial environment is the foundation. The condition for the implementation of digital currency is to have a stable financial environment, but the financial environment in the United States does not seem to be very optimistic, especially after the outbreak of the epidemic, the Federal Reserve has continued to “print money” and many countries have begun to sell U.S. debt.

These are the problems facing the United States. If these problems are not resolved, it will be difficult for the United States to catch up with China in terms of digital currency.

Technological innovation makes China far ahead in all aspects of the world

The development of digital currency has brought a lot of convenience to people’s lives, and payment is more convenient. China has always been committed to technological innovation so it has achieved current achievements.

Looking at the financial development of the United States in recent years, it seems that there has not been a big breakthrough, which has caused the development of the United States to stagnate. This is the power of technology. China has achieved proud achievements by relying on technological innovation. These achievements are beyond the reach of the United States. Digital currency is a trend, and China should seize the opportunity to continue to innovate and develop.

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