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While apparently continuing to develop its digital yuan initiative, the PBoC recently enhanced its crackdown on cryptocurrency-related operations in the country.
The ex-president of the People’s Bank of China Xiaochuan Zhou said that one of China’s main goals to be done through its central bank digital currency is to make retail payments easier and more available to people.
Speaking at the Caixin Hengqin Forum in Zhuhai, Zhou commented that the country will work on making the retail use of digital payment for the digital yuan as simple as possible.
“There are two goals for international digital currencies. The first one, which is also what China envisions is to develop digital payment and its use for retail system in the country, while the other goal is to cross-border payment for international financial institutions.”
Zhou noted that these two goals will need somewhat different technical designs for the digital yuan, and, once the digital payment function is inserted directly in the retail, China could widen its abilities.
He added that the country is a pretty complicated territory for testing out anything and not just new digital currency because of its huge population. Some country with a smaller population could be more appropriate since the cycle for currency circulation is shorter, thinks Zhou adding:
“In case there is something wrong, it will be easier to steer the boat into a different direction.”
Even though Zhou is no longer employed as the head of the Chinese central bank, his words could send a strong message from the authorities regarding the conditions under which the bank decides to launch the digital currency DCEP (Digital Currency, Electronic Payment).
Mable Jiang, a partner at Nirvana Capital notes that the Chinese government has already traditionally sent gentle signals from former senior officials before making formal announcements.
“I think this is an important signal that China would start pushing retail use of DCEP hard in some economies that fit Zhou’s description about smaller population and good internet infrastructure.”
We already wrote about how China may be the first country to launch its own cryptocurrency. It was confirmed already in October that the People’s Bank of China has been studying DCEP for five or six years, and that experts think the technology has matured. They then said that “PBoC is probably the first central bank to introduce digital currency in the world.”
Be it as it may, it won’t be easy for China to employ DCEP since the early indicators of China’s economic performance show there is a continued slowdown in November.
China Economy Slowing Down, May Be Chance for Small Businesses
Chinese industry revenues and profit noted a record fall in October, dropping 9.9% from a year ago, data from the National Bureau of Statistics showed Wednesday. The fall is expected to be continued in November as well which shows that local demand is frail. If this continues, analysts say it could drag down profits overseas as well.
There have been the worst records reported, including manufacturing index and business confidence that all went below 50.
SAIC Motor Corp., the biggest Chinese carmaker, has reported four quarters of falling profit in a row as well as falling off the auto sales also hit by the slowing economy. The automaker slashed its sales forecast in July, predicting the first annual fall in 14 years.
Warren Buffett-backed BYD Co., reported a huge fall of 89% slump in third-quarter earnings and said profit could decline approximately 43% this year. Electric-car maker BAIC BluePark New Energy Technology Co. predicted a 2019 fall in its earnings update.
Qian Wan from Bloomberg Economics says:
“Given weak global demand and uncertainties over trade talk, China’s growth has to rely more on domestic demand. However, worryingly, China’s factory deflation continued and deepened for the fifth month.”
However, there might be a slight dash of optimism among small companies.
“Production activity accelerated as external demand rebounded” while the new orders sub-index for domestically focused smaller companies weakened. The manufacturing sector outperformed, its performance index rising to a seven-month high, while that of the services sector dropped,” noted Hunter Chan and Ding Shuang from Standard Chartered in their report.