Get Ready
for the Next Game-Changer: the Digital Yuan
By Pepe
Escobar
May 29, 2020 "Information
Clearing House" -
A new, radical paradigm
shift is in progress. The U.S. economy may shrink as
much as 40% in the first semester of 2020. China,
already the world’s
largest economy by PPP
for a few years now, may soon become the world’s
largest economy even in exchange rate terms.
The
post-Planet Lockdown world – still a hazy mirage –
may well need a post-Planet Lockdown currency. And
that’s where a serious candidate steps into the
fray: the fiat digital yuan.
Last
month, the
People’s Bank of China (PBOC)
confirmed that a group
of top banks started trials in electronic payment in
four different Chinese regions using the new digital
yuan. Yet there’s no timetable yet for the official
launch of what is called the Digital Currency
Electronic Payment (DCEP).
The
man with the plan is
PBOC governor Yi Gang.
He has confirmed that apart from the trials in
Suzhou, Xiong’an, Chengdu and Shenzhen, the PBOC is
also testing hypothetical scenarios for the 2022
Winter Olympics.
While DCEP,
according to Yi, “has made very good progress,” he
insists the PBOC will be “cautious in terms of risk
control, especially to study anti money-laundering
and ‘know your customer’ requirements to incorporate
in the design and system of DCEP.”
DCEP should
be interpreted as the road map for China leading to
an eventual, even more groundbreaking replacement of
the U.S. dollar as the world’s reserve currency.
China is already ahead in the digital currency
sweepstakes: the sooner DCEP is launched the better
to convince the world, especially the Global South,
to tag along.
The PBOC is
developing the system with four top state-owned
banks as well as payment behemoths Tencent and Ant
Financial.
|
Are You Tired Of
The Lies And
Non-Stop Propaganda?
|
A
mobile app
developed by the Agricultural Bank of China (ABC) is
already circulating on WeChat. This is in effect an
interface linked to DCEP. Moreover, 19 restaurants
and retail establishments including Starbucks,
McDonald’s and Subway are part of the
pilot testing.
China
is advancing fast on the whole digital spectrum. A
Blockchain Service Network (BSN)
was launched not only for domestic but also for
global trade purposes. A large committee is
supervising BSN, including executives from the PBOC,
Baidu and Tencent, according to the
Ministry of Industry and Information Technology (MIIT).
Backed by gold
So what
does this all mean?
Well
connected banking sources in Hong Kong have told me
Beijing is not interested for the yuan to replace
the U.S. dollar – for all the interest across the
Global South in bypassing it, especially now that
the petrodollar is in a coma.
The
official Beijing position is that the U.S. dollar
should be replaced by an IMF-approved Special
Drawing Rights (SDR) basket of currencies (dollar,
euro, yuan, yen). That would eliminate the heavy
burden of the yuan as the sole reserve currency.
But that
may be just a diversionist tactic in an environment
of all-out information war. A basket of currencies
under the IMF still implies U.S. control – not
exactly what China wants.
The meat of
the matter is that a digital, sovereign yuan may be
backed by gold. That’s not confirmed – yet. Gold
could serve as a direct back up; to back bonds; or
just lay there as collateral. What’s certain is that
once Beijing announces a digital currency backed by
gold, it will be like the U.S. dollar being struck
by lightning.
Under this
new framework, nations won’t need to export more to
China than they import so they have enough yuan to
trade. And Beijing won’t have to keep printing yuan
electronically – and artificially, as in the case of
the U.S. dollar – to meet trade demands.
The digital
yuan will be effectively backed up by the massive
amount of Made in China goods and services – and not
by a transoceanic Empire of 800 Bases. And the value
of the digital yuan will be decided by the market –
as it happens with bitcoin.
This whole
process has been years in the making, part of
serious discussions started already in the late
2000s inside BRICS summit meetings, especially by
Russia and China – the core strategic partnership
inside the BRICS.
Considering multiple strategies to progressively
bypass the U.S. dollar, starting with bilateral
trade in their own currencies, Russia and China, for
instance, set up a
Russia-Chian RMB Cooperation Fund
three years ago.
Beijing’s
strategy is carefully calibrated, like playing
go long-term. Apart from methodically
stockpiling gold in massive quantities (just like
Russia) for seven years now, Beijing has been
campaigning for a wider use of SDR while making sure
to not position the yuan as a strategic competitor.
But now the
post-Planet Lockdown environment is shaping up as
ideal for Beijing to make a move. Even before the
onset of the Covid-19 crisis the predominant feeling
among the leadership was that China is under a full
spectrum attack by the United States government.
Hybrid War already reaching fever pitch implies
bilateral relations will only get worse, not better.
So when we
have China as the world’s largest economy by both
PPP and exchange rate; still the strongest growing
major economy, barring the first semester of 2020;
productive, innovative, efficient and on track to
reach a higher technological level with the Made in
China 2025 program; and capable of winning the
“people’s war” against Covid-19 in record time, all
the necessary elements seem to be in place.
But then,
there’s soft power. Beijing needs to have the Global
South on its side. The United States government
knows it very well; no wonder the current hysteria
is all about demonizing China as “guilty” on all –
unproved – counts of fostering and lying about
Covid-19.
An “impeding
arrival”
A key
advantage of a sovereign digital yuan is that
Beijing does not need to float a paper yuan – which
by the way is being sidelined all across China
itself, as virtually everyone is switching to
electronic payment.
The digital
yuan, using blockchain technology, will
automatically float – thus bypassing the
U.S.-controlled global financialized casino.
The amount
of sovereign digital currency is fixed. That in
itself eliminates a plague: quantitative easing
(QE), as in helicopter money. And that leaves the
sovereign digital currency as the preferred medium
for trade, with currency transfers unimpeded by
geography and, the icing on the cake, without banks
charging outrageous fees as intermediaries.
Of course
there will be pushback. As in non-stop demonization
of neo-Orwellian China for straying away from the
whole purpose of bitcoin and cryptocurrencies –
which is to have freedom from a centralized
structure via decentralized ownership. There will be
howls of horror at the PBOC potentially capable of
seizing anyone’s digital funds or turning off a
wallet if the owner displeases the CCP.
China
is on it, but the U.S., UK, Russia and India are
also on their way to launch their own
crypto-currencies. For obvious reasons, the Bank of
International Settlements (BIS), the Central Bank of
Central Banks, is very much aware that
the future is now.
Their research with over 50 Central Banks is
unmistakable: we are facing an “impeding arrival”.
But who will take the Biggest Prize?
Pepe
Escobar is an independent geopolitical analyst.
https://www.facebook.com/pepe.escobar.77377?
- "Source"
Do
you agree or disagree? Post your comment here
