With the virtual yuan, China wants to undermine the duopoly of Alipay and WeChat Pay
China has been testing its virtual currency (yuan) for a few months to be ready on February 4, 2022. Le Monde's Insights
The Central Bank of the Middle Kingdom, we read in the article by Le Monde , was trained for several months on a "homemade" application to develop the use of the yuan in "virtual" mode. The risk is that a surveillance system will spread.
To anticipate. This is February 1, 2022. The Beijing Winter Olympics will start in three days. Arriving at the airport, it quickly turns out that, in general, neither Chinese merchants nor public transport accept a Visa or MasterCard credit card. WeChat Pay and Alipay are excluded as you don't have a phone number or bank account in China.
At the airport, on the other hand, Chinese banks offer you a new simplistic system: to exchange your dollars or euros during the day for virtual yuan, free of charge. Just download the application created for this purpose by the People's Bank of China or, even simpler, attach a chip to a badge that is worn around the neck or even on one of the gloves. Of course, your photo will have been scanned, and thanks to the ubiquitous facial recognition system, any theft would be stupid. During your stay in China, from the fast train that will take you to the Olympic Village to the purchase of the inevitable mascot – the panda Bing Dwen Dwen – for your children, the virtual yuan will free you from any financial worries.
This scenario is not pure fiction. Like a sportsman before a competition, China has been training and testing its virtual currency for a few months to be ready on February 4, 2022. Already in November 2020, the Chinese central bank recorded 4 million transactions for a value equal to 299 million dollars (245 million euros).
THE CHINESE ARE USED
In Shenzhen (southeast) in October, in Suzhou (east) in December and, on a smaller scale, in Beijing and other cities, hundreds of thousands of Chinese are happy guinea pigs. In Shenzhen, 1.9 million people volunteered in October. An electronic lottery distributed 200 yuan (25 euros) to 50,000 of them. They carried out just over 62,000 transactions in approximately 3,300 authorized stores to collect the rest for a week. Of course it can be used for online shopping. In Suzhou, a city of 10 million inhabitants, the central bank doubled the quota: 100,000 inhabitants received 200 yuan to spend between 11 and 27 December. And a similar operation is again underway in Shenzhen until January 17.
In Beijing, a café was also equipped at the end of December in a financial district in the south of the capital. Shen Xue, three-time world champion in figure skating, downloaded the application at the new Beijing Daxing airport and, thanks to a chip attached to his ski glove, was able to buy a subway ticket and go to the city center.
For Chinese people who have been used to paying with their mobile phone for years, thanks to Alipay ( a division of Alibaba ) or WeChat Pay (Tencent), downloading and paying with the People's Bank of China application is absolutely common. Seeing the effigy of Mao appear again, as on paper money, also brings a vintage touch.
THE END OF THE DUOPOLY OF ALIBABA AND TENCENT
That's not the point. Seeing the Chinese television reports at Suzhou Walmart on these consumers who, when they arrive at the electronic checkout, have the choice between Alipay, WeChat Pay and the central bank application, it's hard not to think that one of the central bank's goals is to put an end to the duopoly. Together, the two giants account for 94% of the country's online payments! According to the Wall Street Journal , one of the reasons for the shame of Jack Ma, founder of Alibaba, is the refusal to transmit the data collected on consumers to the People's Bank of China. Furthermore, unlike private operators, the latter do not charge merchants anything.
Launched after six years of preparatory work, the tests launched by the Chinese central bank are also both technical – Beijing is looking for a technology capable of possibly processing 300,000 transactions per second – and psychological. Will the Chinese accept that the authorities control their spending in real time?
The stakes are also high for the international community. About ten years ago, the founders of Bitcoin, the first real virtual currency, wanted to create a monetary instrument that no longer depended on central banks. Today China is carrying out a diametrically opposite project. Any other virtual currency is prohibited in China. "It's not like Bitcoin, it's not the subject of speculation, and contrary to Facebook's plan, this currency isn't backed by a basket of currencies," Chinese officials repeat over and over again. Its official name is deliberately austere: Digital Currency Electronic Payment.
AN COMING BATTLE
Westerners wonder. This virtual currency “has the potential to create the largest repository of financial transaction data in the world. And while it can solve some financial governance challenges such as money laundering, it could also create unprecedented opportunities for surveillance, ”wrote the experts of an Australian think tank, the Australian Strategic Policy Institute. in October 2020 in a study entitled “The Downside of the People's Bank of China's Virtual Currency”. For them "it is not absurd to assume that the Chinese party-state will encourage or even require foreigners to use this virtual currency in some international transactions as a condition of access to the Chinese market".
In the emerging rivalry between the dollar and the yuan, China's leadership in virtual currency allows it to set standards that could inspire other countries. In some scenarios, it could even allow the Middle Kingdom and other countries to escape US sanctions based on the use of the dollar in transactions with pariah states like Iran or North Korea. Although the non-convertibility of the Chinese currency remains a major obstacle to its internationalization, everything is ready for a battle to come. Did you enjoy the debates around Huawei? You will like the ones on the Chinese virtual currency.
(Extract from the foreign press review by Epr Comunicazione)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/fintech/yuan-virtuale-cina/ on Sun, 17 Jan 2021 06:23:44 +0000.