Category Archives: Asia

FRED REED: Plumbing The Chinese Dijjywan

Asia, Business, China, Economy, FRED REED, Government, Trade

“… When America cuts a country off from SWIFT … the blow is economically devastating. The mere threat of disconnection intimidates. Consequently many countries would like to have an alternative to [spiteful American economic strong-arming via] SWIFT.”

By Fred Reed

Normally I write about things I know. In the case of digital currencies, and in particular the digital yuan (hereinafter dijjywan) I write about something that piques my curiosity. So little seems to be known that it is difficult to find anything definitive. Yet the question is so important, digital currencies so new, the implications so sweeping, that discussion seems a good idea. The following therefore is a sort of declarative question, a listing of ideas from many sources, perhaps sometimes wrong, about which I hope readers can enlighten me. To avoid endless qualifications and caveats, I write affirmatively things that I don’t really know. Correction and thoughts welcome.

Some things to know: The dijjywan, being rolled out in the Winter Olympics, is not a cryptocurrency like Bitcoin, intended to maintain anonymity of users: all transactions are or can be known to Beijing. A dijjywan account is not a bank account, though it is administered by PBOC, the People’s Bank of China.  You don’t need to have a bank account to use it. It does not earn interest. You cannot speculate in dijjywan any more than you can with normal yuan, because the digital yuan is the normal yuan, but in digital form. A dijjywan account does not provide access to credit. It is as close to being physical currency as you can get without being physical currency. Transactions are instantaneous and final.

So how does it work? As an individual, you will download an app that China calls a digital wallet to your cellphone, as you would any app. This is currently being done in China. You do a face scan and the system gives you a unique QR code. You now have a dijjywan account. No bureaucracy, filling out of forms, demands for identification, or examination of financial history. There is nothing new or Star Wars about this. Everyone in China has already done it to use WeChat Pay or Alipay.  Some eighty percent of retail transactions in China are made by cellphone app, making acceptance there likely.

Suppose that you are in Kathmandu and I am in Cancun and you want to send me five hundred dijjywan. You call up the app, go to contacts, tap Fred, type in 500, and hit send. Five seconds later in Mexico, I have the money. (I made that up, but it is close to payments I have seen made in Chengdu.) For practical purposes instantaneous, no bureaucracy.

Interesting question: What would easy, convenient, fast transfer of funds by cellphone do to Western Union? What would it do to debit cards from Mastercard and visa? American credit-card companies get a percentage of every sale. If China, as a tactic of economic warfare, did not take a rake-off or took a smaller one, what would this do to Visa and Mastercard? Merchants would certainly favor a system that cost them less.

When China goes cashless with the dijjywan, which is its stated intention, it will improve efficiency within China but have no great effect in the outside world.  Who outside of China would want to use a Chinese digital currency?

Perhaps lots of people. There being many Chinese tourists in Cancun, hotels and restaurants would like to grab business from Chinese who didn’t want to bother with currency conversion. Mexico likely would be happy to have the money come into the country.  People in Zimbabwe, whose currency is worthless anywhere else, and who might worry that Harare would print even more money and destroy their savings, would be happy with dijjywan that could be taken out of the country or spent internationally online. Such a nation, if it wanted a stable currency, might make the dijjywan the national currency, or a national currency, as Panama and Ecuador do with the dollar. People without bank accounts, estimated at two billion, would find it useful. The result would be a distributed all-yuan Sinocentric financial ecosystem.

The Chinese currency would appeal to the many countries that do not want American influence over their finances. Dijjywan would be a reliable store of value for, say, people in Brazilian favelas as robbery would be nearly impossible: An armed robber could force his victim to transfer money to his phone, but this would create a record in the Chinese cloud of time, place, amount, and identity of both parties. The authorities could simply extract the stolen lucre and replace it with the rightful owner, and freeze the thief’s account. Digital policing of this sort has been mentioned by Chinese authorities.

Intriguing, though not related to China: America is dabbling with the idea of a digital dollar. If America went cashless (granted, not likely before the heat death of the sun), the illegal drug trade would disappear overnight. In retail transactions, on which the trade depends, with the friendly corner crack merchant, the identities of both buyer and seller would be recorded. This would not be good for business.  Dealers could easily be detected. No arrests would be needed, as freezing their dijjywan account would suffice. Since accounts depend on face recognition, the dealer could not set up another account. Totalitarianism has its appeals.

Digital-currency accounts would be programmable. If a country went on an anti-booze crusade, people could be prevented from buying more than a certain amount of liquor per month. China has pointed out the virtues of the dijjywan in stopping money laundering. These ideas justifiably upset civil libertarians, but they represent an upside to the downside. What would be the social effects of ending the drug business in black ghettoes?

The possibilities for surveillance and social control are obvious but, since China is going all-digital anyway, alarm is unlikely to have much effect. Perhaps worth noting is that America is going fast in the same direction, with much of  the surveillance and censorship ‘being done by semigovernmental enterprises such as Google and Twitter. With many countries considering digital currencies, it appears that we will fairly soon have them anyway. And, if history is a guide, the likelihood is that most people would accept surveillance as the price of convenience.

But let’s get to the serious stuff: America’s financial sanctions on countries it doesn’t like. As perhaps most people know, international payments, as for example for oil, go through the SWIFT financial payment system, headquartered in Brussels, supposedly independent but in fact under American control. It is the only practical way for countries to do business with each other. When America cuts a country off from SWIFT, as it has with Venezuela, Iran, and Cuba, the blow is economically devastating. The mere threat of disconnection intimidates. Consequently many countries would like to have an alternative to SWIFT. So where does the dijjywan come in?

Note that the digital yuan is scalable. In principle it is as easy to send a million as a hundred dijjywan, making it practical as a means of paying for, say, petroleum from sanctioned countries. Further—read this carefully: dijjywan transactions are completely independent of Washington, completely independent—eeek!—of SWIFT, and, thanks to heavy encryption, opaque to the US. This threatens America’s ability to strongarm other countries and, if widely adopted, would result in a major diminution of US power in the world.  It may be that China has thought of this. The US certainly has.

Why could a tobacconist in Paris not buy five thousand dollars of cohiba cigars from Cuba, or China a tanker of oil from Venezuela, or any business in Europe goods to or from Iran, or from each other, in dijjywan? The US might make it difficult for sanctioned countries to convert dijjywan to other currencies, but this would simply force those countries to trade more with China.

China has said repeatedly that, why, no, it has no thought of using the dijjywan for international settlement payments. As Deutsch Bank says, it is being set up for domestic use. However, China is working with—whatever exactly that means—Hongkong, Thailand, and the UAE for just this purpose. Why the UAE? Not because China wants to further retail sales to the Emirates by Alibaba, since they have the aggregate population of a large city bus. But they have oil. Interesting. Let us remember that China very, very much wants to internationalize the yuan.

A concern mentioned by the Treasury Department, and the Foreign Policy Research Institute,  is that there could result a distributed Sinocentric financial ecosystem independent of the West. Many countries that trade heavily with China, or have poor relations with America, might come aboard. The Central Asian stans, the BRICS, Latin American countries tired of being under the US boot. China might make use of the dijjywan a requirement for loans and participation in the BRI. It would not be either the dijjywan or the dollar as countries could use both.

American officials often say complacently that the yuan accounts for only a small percentage of international commerce and that the dijjywan is no threat to the dollar’s hegemony. Perhaps. But the world’s economic and technological center of gravity is moving to the east, a market as huge as China’s has persuasive powers all of its own, many countries want to avoid American domination, and the digital yuan is something entirely new. I don’t think anyone really knows what effects we will see.

Thoughtful comments welcome and, again, I throw these ideas out in search of enlightenment, not because I regard myself as an authority.

Read Fred’s Books! Or else. We know where you sleep.

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FRED REED describes himself as [previously] a “Washington police reporter, former Washington editor for Harper’s and staff writer for Soldier of Fortune magazine, Marine combat vet from Viet Nam, and former long-haul hitchhiker, part-time sociopath, who once lived in Arlington, Virginia, across the Potomac River from the Yankee Capital.”
His essays “on the collapse of America” Mr. Reed calls “wildly funny, sometimes wacky, always provocative.”
“Fred is the Hunter Thompson of the right,” seconds Thomas E. Ricks in Foreign Policy magazine. His  commentary is “well-written, pungent political incorrectness mixed with smart military commentary and libertarian impulses, topped off with a splash of Third World sunshine and tequila.”

FRED’S BOOKS ARE ON AMAZON, HERE

FRED’S ARTICLES ARCHIVE

Killer Kink

Hardboiled is back! (The exclamation point is to arouse wild enthusiasm int the reader, a boiling literary lust.) Gritty crime fiction by longtime police reporter for the Washington Times, who knows the police from nine years of riding with them. Guaranteed free of white wine and cheese, sensitivity, or social justice.

UPDATED (9/28): NEW COLUMN: No, Lara Logan, Only Simpletons Think Afghanistan Is Simple

Argument, Asia, Critique, Foreign Policy, Islam, Neoconservatism, Political Philosophy, War

NEW COLUMN, “No, Lara Logan, Only Simpletons Think Afghanistan Is Simple,” is currently on WND.COM, The Unz Review, Townhall.com, CNSNews and American Greatness.

And excerpt:

Fox News’ Tucker Carlson appears in thrall to Lara Logan’s political observations—to her “philosophical” meditations, too. Alas, Logan is no Roger Scruton.

You might have heard Logan claim, recently and repetitively, that everything in the world is simple. “Everything is simple,” she keeps intoning in her appearances on Fox News.

Applied to the fiasco in Afghanistan, Logan’s Theory of Simple is that, considering that America is omnipotent, whatever occurs under its watch is always and everywhere planned and preventable.

Ridiculous and wrong, yet Tucker, whom we all love to bits, giggles in delight.

“They want you to believe Afghanistan is complicated,” lectured Logan. “Because if you complicate it, it is a tactic in information warfare called ‘ambiguity increasing.’”

“So now we’re talking about all the corruption and this and that,” she further vaporized. “But at its heart, every single thing in the world… always comes down to one or two things …”

Logan likely recently discovered Occam’s Razor and is promiscuously applying this principle to anything and everything, with little evidence or geopolitical and historic understanding in support of her Theory of Simple.

Occam’s Razor posits that, “the simplest explanation is preferable to one that is more complex,” provided “simple” is “based on as much evidence as possible.”

A nifty principle—and certainly not a philosophy—Occam’s Razor was not meant to apply to everything under the sun.

Misapplied by Logan, why? Primarily because Logan’s explanation for America’s defeat in Afghanistan—that the United States threw the game—is hardly the simplest explanation, despite her assertion to the contrary.

The simplest explanation to the US defeat in Afghanistan, based on as much information as is possible to gather, is that, wait for this: America was defeated fair and square. As this columnist had argued, the US was outsmarted and outmaneuvered, in a mission impossible in the first place.

… READ ON. NEW COLUMN, “No, Lara Logan, Only Simpletons Think Afghanistan Is Simple,” is currently on WND.COM, The Unz Review, Townhall.com, CNSNews and American Greatness.

UPDATED (9/28): Afghans have hereditary disorders due to marriage between relatives.

 

NEW COLUMN: Afghanistan: Bringing The Military-Industrial-Complex Home

America, Asia, China, Foreign Policy, Iran, Military, War

NEW COLUMN: “Bringing The Military-Industrial Complex Home,” or “State Department Still Doesn’t Know Shiite From Shinola,” is on WND.COM, the Unz Review and The New American (“War Is the Health of the State — and the Statists“).

Excerpt:

Realpolitik: What Modest Foreign Policy Looks Like

Similarly, you are not a good pack animal unless you worry about “the Uyghurs, the Uyghurs. China is oppressing the Uyghurs. Our values, our values.”

Uyghurs are also China’s biggest headache, now that America is no longer mired in Afghanistan. What the dummies on the idiot’s lantern fail to tell you—although analysts at The Economist do—“Uyghurs count among thousands of foreign jihadists active in Afghanistan, mostly enlisted in Taliban ranks.”

So, as the skittish media hounds and politicians, stateside, gnash teeth and beat on breast over Afghanistan, less hysterical countries, abutting Afghanistan, are acting calmly in their national interest, to ensure that Jihad and heroin don’t spill over their borders.

Unlike Lara Kissinger Logan of Fox News, who “thinks” America could have won a war that other superpowers have lost—the Chinese and the Iranians are hip to what just happened. This was “probably one of the best conceived and planned guerrilla campaigns ever,” says Mike Martin, a former British army officer in Helmand province, now at King’s College London. “The Taliban went into every district and flipped all the local militias by doing deals along tribal lines.”

In negotiations with the Taliban, Beijing has thus realistically demanded that Afghanistan not become “a base for ethnic Uyghur separatists.” For their part, “Taliban leaders have pledged to leave Chinese interests in Afghanistan alone and not to harbor any anti-China extremist groups.”

Like Beijing, Tehran, too, is busying itself with realpolitik….

… In all, after Afghanistan, we can all agree that American foreign policy is an angels-and-demons Disney production—starring the prototypical evil dictators killing their noble people, until the US rides to the rescue—and that the producers at Foggy Bottom don’t have the foggiest idea what they are doing. …

… READ ON. “Bringing The Military-Industrial Complex Home,” or “State Department Still Doesn’t Know Shiite From Shinola,” is on WND.COM, the Unz Review and The New American (“War Is the Health of the State — and the Statists“).

East Asian Countries Believe In, OMG, Ability (IQ, Too), Not Equity

Affirmative Action, America, Asia, China, Education, Egalitarianism, Government, Human Accomplishment, Intelligence

While America is working at propelling the dumbest people to the top, in the name of equity, the latest buzzword for such an idiotic endeavor; while the US is cultivating a slumdog culture—the East Asian countries are sticking to more Confucian principles, like … merit.

Japan, Singapore, South Korea, Taiwan and China have “one feature in common.” Via The Economist:

… a belief in strong government institutions run by the best and the brightest. This emphasis on meritocracy also has deep roots in Confucian culture. The entry bar to the Chinese Communist Party is set very high: only the top graduating students are admitted. Equally importantly, the rising levels of competent governance are both fuelled by, and contribute to, rising levels of cultural confidence. All this is gradually eroding the deference to the West that used to be the norm in Asia.

Government is always coercive. America’s has the added “benefit” of being both dumb and coercive. See this week’s column: “Systemic, Institutional Rot: From Big Freeze In Texas To Fires In Cali.

MORE by KISHORE MAHBUBANI (Apr 20th 2020)