While China’s economy is in disarray under both internal and external pressures, the Chinese Communist Party (CCP) has expedited the digitization of its currency. Besides the CCP’s grand strategy to destroy the US by destroying the US dollar, the Chinese people found themselves the target of CCP’s robbery and enslavement, made possible by the sovereign digital currency.
“The CCP is rushing to digitize its currency because there is not much time left for the regime.
Its economy has collapsed.
The country is in a recession.
The CCP cannot control the people after the crisis occurs without the implementation of digital currency.
The digital currency is in the end a tool to control the people and society.
So it is a new powerful tool to maintain stability.”
Chinese Netizens Warn Against Digital Currency
(Translation of the social media post about digital currency)
The first step is to let the Chinese people accept the digital currency.
The second step is to implement a ration-type of control to limit monthly spending (due to food shortage, etc). For example, each person could be permitted to purchase up to 300 yuan of food, 300 yuan of cooking oil, and 300 yuan of clothes per day. Digital currency allows the government to set a digital ration.
The exchange rate between the old paper currency and the new digital currency can be 100:1, or even 1000:1. Similar currency replacement had occurred after the CCP took over China in 1949. This is just an idea. Please refer to the history of currency in the former Soviet Union or other socialist countries for reference.
The government can freeze the digital currency of those disliked by the government, taking away their means of survival. The digital currency will become a tool to fully control the Chinese people.
The government can locate and target individuals through digital currency:
- Locate individuals through consumption-tracking
- Freeze individuals’ digital wallet to cut off their means of survival
- Create multiple functions in the digital wallet, so that certain functions can be disabled according to individuals’ violations.
The framework of a slave society is formed. If there is no external intervention or help, all the Chinese citizens will become slaves.
There is good news about the digital currency though. The issuance of a new currency called “Gold Yuan” by the Kuomintang government led to its demise.
The CCP is rushing to digitize its currency because there is not much time left for the regime. Its economy has collapsed. The country is in a recession. The CCP cannot control the people after the crisis occurs without the implementation of digital currency. The digital currency is in the end a tool to control the people and society. So it is a new powerful tool to maintain stability.
The adoption of digital currency is coupled with the replacement of the old paper currency. There is no turning back. After the implementation of the digital currency, its exchange rate with a new paper currency could be 100:1 in the future (old paper currency : digital currency : new paper currency =100 : 1 : 0.01). So it is like getting on a bus as a teenage girl, but getting off the bus like an old woman.
I think the insurance of the digital currency is to replace the over-issued 5th-generation-renminbi, turning paper money into digital currency then a new paper currency with 100 : 1 : 0.01 exchange rate. If the regime can survive until that day, there is no doubt that this will be their plan.
In summary, the purpose of the digital currency is:
- becoming a tool to maintain stability
- turning wealth into bubbles and replace the 5th-generation-renminbi
- introducing a new paper currency after the full implementation of the digital currency
- leverage and cancel the local debts
CCP disallows the conversion from digital currency to gold or foreign currencies
The head of China’s central bank stated in a press conference that the new digital currency cannot be converted to gold or foreign currencies.
This means that the CCP will take possession of gold and foreign currencies while forcing people to use the state-controlled digital currency.
This also prevents capital from fleeing China.
Even though the CCP said that it was a rumor that the people would only get digital currency for selling houses in Shenzhen, but the rumor was regarded by many as a ‘test’ to see people’s reactions.
Sun Guofeng, the head of the Monetory Policy Department of the People’s Bank of China, said on Aug 25 that there is no timetable for the formal implementation of the digital currency. It is still in a testing phase.
Sun Guofeng said that the name of digital currency is called “digital renminbi”.
On July 10, Bloomberg reported that the CCP is to going to collect oversea income tax from high-net-worth Chinese.
The digitization of the currency is another wealth transfer from the Chinese people to the CCP.
Digital Yuan Explained
CCP Media: Many factors favor rise of China’s new economy and renminbi
China has a key window of opportunity to advance its pursuit of renminbi internationalization as global investors are seeking stability amid volatility in markets caused by the COVID-19 pandemic.
At present, most of the major economies have resorted to extremely low or even negative interest rates to cushion economic shocks caused by COVID-19. Financial assets with negative interest rates have been on the rise continuously in the world.
The People’s Bank of China, the country’s central bank, however, has not followed the common playbook and retains some room for conventional monetary policy, with the one-year benchmark lending rate, or the prime loan rate, coming in at 3.85 percent in August.
Considering that the PBOC has started to normalize its monetary policy from the anti-crisis easing mode, positive interest rates in China and virtually zero or negative ones in other major economies may co-exist for a relatively long time.
This has constituted an advantage for the renminbi as the preservation of conventional policy space not only means that more tools are available to China’s monetary authorities to buffer potential shocks in the future, but indicates higher returns on renminbi-denominated assets.
Another consideration is that the large-scale or even unlimited quantitative easing measures adopted by the United States and the European Union have caused concern to global investors.
Such QE measures, by virtue of the international currency status of the dollar and the euro, actually force global holders of these currencies to share the cost of redressing domestic economic issues to some degree, usually in the form of currency depreciation or fluctuations in exchange rates.
This would encourage global investors to raise their holdings in other currencies to reduce exposure to such costs, reinforcing their willingness to hold more renminbi-denominated assets.
This trend has started to manifest itself. Since the beginning of the third quarter, the spot rate of the onshore renminbi has appreciated about 2 percent against the greenback to roughly 6.91 as of Friday.
Cross-border payments in renminbi came in at 12.7 trillion yuan ($1.8 trillion) during the first half of the year, up by 36.7 percent year-on-year, according to PBOC data.
PBOC Governor Yi Gang said in a recent interview with the Xinhua News Agency that the internationalization of the renminbi is maintaining “good momentum” and pledged to continually advance efforts in this respect.
By far, the heft of the renminbi in the global currency system remains limited, despite having made significant progress in its global march in recent years. Foreign capital now holds roughly more than 2 percent of the renminbi-denominated financial assets.
To grab the opportunity of boosting the holding and use of the renminbi in the global community, China should step up efforts to improve related financial infrastructure, as a critical part of the nation’s efforts to build a “dual-cycle” development pattern.
The pattern, proposed by China’s leadership recently, features the smooth functioning of both the domestic and international economic cycles to maintain steady economic development despite lingering challenges, with the domestic one being the mainstay.
As China’s financial market has developed into one of the biggest in the world, it is proper to consider the cross-border circulation of financial resources as an important aspect of the international cycle and high-standard opening-up efforts.
Strengthening the use of the renminbi on the international stage will help more closely link China with other parts of the world in terms of the circulation of financial resources, countering some forces that intend to delink the country with international capital.
When it comes to the domestic circulation of financial resources, the strategic opportunity has unfolded for China to spur the growth of new economy by funneling more money into the sector via direct financing channels.
Liquidity level has risen both at home and abroad amid policymakers’ commitment to facilitating economic recovery.
The M2, a broad measure of money supply, rose 10.7 percent year-on-year to 212.55 trillion yuan at the end of July in China. The growth rate is 2.6 percentage points higher than the same time last year, according to official data.
In the US, the year-on-year M2 growth surged to 22.9 percent in June from 6.7 percent at the end of last year, said a Goldman Sachs report.
A lot of factors are in place to help direct the abundant liquidity into innovative enterprises. The most prominent one could be the booming financing needs of the flourishing new-economy sector amid digitalization and industrial upgrading, a trend that has been accelerated by the COVID-19 pandemic.
Favorable policy condition counts as well. The smooth implementation of the registration-based initial public offering system on Shanghai’s STAR Market has made going public easier for new-economy businesses. From this week, even the ChiNext board in Shenzhen will implement this market-oriented reform.
Also, China’s stringent regulation over property sector speculation to prevent financial risks has increased the attractiveness of capital market investment and fueled the trend of residents adding equities to their overall portfolio of assets.
During the first six months of the year, the number of A-share IPOs stood at 118, with the amount of fundraising totaling 139.3 billion yuan, surging 84 percent and 131 percent, respectively, from the same period last year, according to global auditing firm PwC.
More policies should be in the pipeline to sustain the rapid rise in the number of listed firms, such as furthering the market-oriented allocation of financial resources and revising the financing rules to better cater to the changing needs of new-economy businesses.
I expect the brisk expansion in direct financing dominated by new-economy businesses to continue in China, which can go a long way toward promoting economic upgrading while preventing a surge in the leverage level.
In short, the global easy monetary environment at present has offered China an important opportunity to advance its drive to boost the new-economy sector, as well as to further internationalize its currency.
Stepped-up policy efforts to tap into the opportunity can be expected, as part of the nation’s efforts to facilitate the circulation of financial resources both in domestic markets and with international counterparts.
The writer is chief economist with the China Banking Association and executive director of the HSBC Financial Research Institute at Peking University. The article is based on his recent speech to the China Macroeconomy Forum.
CCP accelerates digital currency expansion to mask economic problems
China is expected to expand the central bank’s digital currency pilot programs to a broader range later this year or early in 2021, focusing on retail use. That may replace some functions of bank cards, a former State bank executive said.
China is implementing programs to test the digital currency in Shenzhen, Guangdong province; Chengdu, Sichuan province; Suzhou, Jiangsu province; and Xiong’an in Hebei, with some facilities to be used during the 2022 Winter Olympics, according to the People’s Bank of China, the central bank.
The currency has been tested within a small scope and in some cases, such as payments of retail sales and salaries, and it has matured sufficiently to go public on a wider scale, said Li Lihui, former president of Bank of China.
“But the pilot program is relatively limited right now, involving a small group of people. The trials’ expansion may take more time; it would be a gradual process,” said Li, who is head of the blockchain research group of the National Internet Finance Association of China, in an exclusive interview with China Daily on Monday.
“Trials of the central bank digital currency may be expanded within the year or early next year, but whether it will quickly be introduced to the whole country still requires observation.”
One of the premises Li described is that the underlying technology and the whole digital currency system should meet certain standards, such as stable operation and applications that satisfy public needs. It would be accepted by a broader range of users when the digital renminbi really reaches market competitiveness, he said.
Once the pilot program is expanded－especially in developed regions in China with a huge number of consumers－the digital currency system will have to be able to serve a “hypermarket” with a technology infrastructure processing data from users in a fast, highly secure and resilient way, he added.
“If the pilot program started in the Hong Kong and Macao special administrative regions, the designers and supervisors would need to consider the corresponding institutional arrangements. If the digital currency is for cross-border use, a more complicated technology platform should be adopted to connect with outbound transaction systems.”
The digitalized renminbi issued by the PBOC is called the “digital currency and electronic payment”, or DC/EP. Its goal is to replace part of the cash in circulation, the central bank said earlier.
The central bank may coordinate with electronic payment service providers, such as Alipay and WeChat Pay, to promote the new digital renminbi at the initial stage, which is a way to save costs and have the form of payment more easily accepted by the public, Yang Dong, head of the Financial Technology and Blockchain Research Center of the Law and Technology Institute at Renmin University of China, told China Daily last week.
From the design information disclosed earlier by the central bank, the DC/EP could eventually replace bank card business to some extent. While the DC/EP is expected to become one of the main payment instruments along with mature third-party payment platforms for a certain period of time, it will not replace them in the short term, according to Li.
“The DC/EP will support offline payment, supported by “near field communication” technology, or NFC, which is a big breakthrough compared with online transactions and it doesn’t need to be tied to any bank account. Another advantage is that the digital currency may support large-sum payment,” he added.
Before the currency is tested in a broader range, standards for digital currency technology, applications and market promotion should be created, tested and approved by a third-party certification body to steadily improve the experimental process, Li said.
“The regulatory authorities must issue rules and regulations to ensure efficient supervision of the whole system, which will require a longer period for preparation.”
Cross-border usage of the digital renminbi may require currency swap arrangements, depending on more complicated conditions, and the whole international financial system will be influenced by the birth of new central bank digital currencies, according to Li.
“It will not be easy for the DC/EP to enter the international market, and it is not designed, as of today, for financial assets trading or cross-border investment.”