I can imagine a world where China finalizes their "official" crypto currency, transitions their entire economy over, forces all international trade to use it, and it becomes the standard currency for logistics. It'll provide traceability for them for all Chinese-connected transactions forever. The best oversight and control mechanism. They find current sanctions ineffective because the levers aren't strong enough yet, but they'll be more than happy to sanction countries themselves in the future.
China is a large economy but it's nothing like the dominant force many people seem to think. China is 16% of US trade, 22% of EU trade, 22% of Japan's trade, 22% of South Korea's trade, etc... the numbers are the same for just about everyone.
If you add up all the West-aligned countries (including Vietnam, Philippines, etc - they're already in a cold war with China over the South China Sea), you're looking at 80-90% of China's total trade volume.
Without some kind of major political split in the dollarized world, China just doesn't have that kind of leverage. We're currently seeing the opposite of that split.
Vietnam is definitely neutral to both parties. They can't afford to pick sides at all. In fact they have a 3 N's policy: no foreign military bases, no alliances, no aligning with one country against another.
I'm not sure where you get this idea that they are US aligned. This is specifically against their policy. They play a very balanced game as they should given their big neighbour...
> China is a large economy but it's nothing like the dominant force many people seem to think. China is 16% of US trade, 22% of EU trade, 22% of Japan's trade, 22% of South Korea's trade, etc
You seem to think of those percentage as small - they represent the largest trading partner of each of those country/entity.
plenty of countries are "allies" with the west because of convenience and alignment - but that can change on a dime. And countries aren't stupid; if you can see that currency sanctions can have such a major affect, you would prepare by ensuring that you are diversified.
I say that the current currency and banking sanctions are a one use tool - it is effective in the short term at hurting the russian economy, but the west will be paying a future price for it, one where the west's currency and institutions are trusted less than it would have been had they not done this.
You can argue that these sanctions are preferable to war. After all, any war with russia and the west will be nuclear, without a doubt. So the west is choose the lesser of two evils to deploy. But i'm not so sure that nuclear war is not averted.
One more thing: China keeps making noise about military intervention in Taiwan.
Based on what we see today, what would be the economic consequences for that kind of adventurism? Who wants to hold the currency of a nation that is one jingoistic decision away from receiving the Russia treatment?
That said, I do think the world's strong reaction to Russia - whether or not it ultimately makes a difference in Ukraine - has made the Taiwanese a lot safer. Unlike Putin, the CCP does seem to care about China's place in the world.
I know that trade with China makes up a relatively small part of the US economy however, what happens when nearly all the goods you buy say some part of it is made in China?
Maybe you are looking at the wrong number. % of trade is an abstract number. Not sure what it really means.
How about % of goods. How many % of our everyday goods are produced in China? Can we even live a normal life if China stop sending those products to us for a week, a month?
The Digital Yuan is a digital currency but not a cryptocurrency. It works similarly to a bank account except instead of having an account with the bank, you have one directly with the government, although currently all e-RMB accounts are attached to traditional bank accounts.
I don't understand how more people are not catching up to this simple fact that central bank "digital currencies" are nothing more than a by-pass of distributed private banking (brick and mortar + online banks). It's just moving more levers closer to central authorities.
Precisely this. This is where some other countries are going to when it comes to the digitisation of many currencies as CBDCs.
It is especially towards those part of the ISO 20022 [0] standard which the technologies will be based on some cryptocurrency technologies like Stellar [1][2], XRPL [3][4], Algorand, etc.
I wouldn't say it's just an account. You can do offline exchange much in the similar way to a paper currency.
Those accounts are still annoymous to both parties in transaction, not to the central bank. I would say it's much more annoymous than a traditional account, a credit card or debit card, but probably not as annoymous as cash.
Also, it's naturally fee-free, you don't pay ridiculous account maintenance or transaction fee.
Haha except there will be no customers and manufacturers will move to other cheaper places… if you think the dollar is going away without a fight we’ve seen how the money works now and it’s all controlled by the West right now. That’s why the Chinese want to change it and not a single western nation will agree to it ever because how does it work for them?
Just spitballing, China could strike a deal to be the exclusive seller of Russian oil and gas to Europe, and then demand payment in their own cryptocurrency. Why would Russia do this? As a payback for China’s support, for one thing.
Then they (the west) would have to pay a higher price. Thats the weakness with capitalism if you have a choice between paying more or less for the same thing with the same quality less is always better.
Since all crypto transactions are traceable, I doubt it's something corrupt officials want to implement, they wouldn't be able to hide their stealing that way.
The Chinese government most likely can already see virtually all transactions made by the common Chinese folk, since WeChat/AliPay is very popular there.
That is the whole point of having a blockchain where all the transaction are public and even if the criminal gangs, money launderers use it, the addresses are all traceable. No where to hide.
Now when you have a cryptocurrency that uses an encrypted blockchain where the transactions are private and are only known by the sender and the receiver, then you know that the Chinese government will not like such a thing to be used since they know that the criminal gangs and scammers are most exactly going to use something like that with Signal E2EE and MobileCoin for their illegal activities.
Certainly, it is very easy to hide your laundered digital cash on MobileCoin than it is on Bitcoin, or a stablecoin.
You do realize if you use credit or debit card, your banks gonna know, so therefore your government? Let's not pretend using WeChat/Alipay is somehow better or worse for that matter.
At that point I don't know why you would essentially need that kind of infrastructure. Just tell everyone that on some date in the future paper cash will not be legal tender and everyone has a government issued bank account. You could use a permissioned ledger (a hyperledger) at this point.
> I can imagine a world where China finalizes their "official" crypto currency, transitions their entire economy over, forces all international trade to use it
Likewise India is setting up alternative cross border banking with Russia. Will be fascinating to see the end-result of this; how someone with a Russian bank account can pay for a meal in Shanghai or Mumbai.
> how someone with a Russian bank account can pay for a meal in Shanghai or Mumbai.
Two weeks ago they'd just pull out their Visa/MasterCard, and since the restaurant and the Russian's bank are both in the Visa network, it gets taken care of that way. Visa and MasterCard are blocking service to sanctioned Russian banks, which explains why Russians are busy going to the ATM to pull out cash.
China has their own network called UnionPay, so those banks have probably been calling them to join this last week.
I can imagine that Russians will also install AliPay or WeChat.
Since 2015 all Visa and MasterCard transactions within Russia are handled by National Payment System and are not affected by any sanctions. There's also a Russian payment system Mir based on NPS. Operators of NPS cooperate with Union Pay and even issue co-branded cards, so I won't be surprised if NPS-UnionPay bridge will allow avoiding sanctions for any payments between Russia and China.
>Visa and MasterCard are blocking service to sanctioned Russian banks, which explains why Russians are busy going to the ATM to pull out cash.
VISA and MC has nothing to do with lines to the ATM for cash. We have MIR system that works without any problem within Russia and works with Apple\Google\Whatever Pay too.
Russia has chosen a path that leads to them becoming a Chinese vassal state. China needs their oil, gas, minerals, and food, and is far richer and more powerful. China will end up turning Russia into a resource extraction client state.
Edit: I wonder if China greenlit the invasion precisely because they understand that this will hand them total control of Russia. Putin is a fool who may have been played.
Russia's elite may actually fare very well in the long term, since it'll be similar to how the USA props up the Saudi royal family in exchange for their ability to pump oil and regulate the market price. Russia's people will find themselves more and more disempowered and the country will continue to suffer massive brain drain.
From the Chinese perspective, of the USA has their Saudi, why can't they have their Russia? For the Russian commoners it will be a bad deal, but if the deal can be made attractive enough for the Russian leadership there seems to little they can do.
Thats partially the reason for Russia wanting to "get the band together again" with the reformation of the USSR, or a Greater Russia. You do get the feeling that the Stans are the next set of nations to experience a post USSR anschluss. The only way they can get anywhere near the USSR in power and influence is to be bigger and with more people. That way it can threaten Western Europe more effectively and hold its own against China and the US.
Unfortunately for Putin I think they've already blown it. China could come in and basically buy Russia now given the damage all these sanctions have done to their economy, and meanwhile they've illustrated clearly that the rest of "the band" does not want to get back together. Putin is going to need to learn Chinese.
Exactly. CCP, the most powerful opposition to democracy, gains foothold next to US and EU borders. Putin and the elite gets their bonuses and keeps living in their mansions. No one dares supporting a revolution in Russia, China's new buffer state, lest Xi gets angry. Cosmopolitan middle class Russians suffer for a bit, forget iPhones and learn Chinese. Brainwashed Russians are happy to unite with their communist comrades.
It was to be expected. Slightly related, there's also this, from today's Financial Times [1]:
> Commodity prices soar to highest level since 2008 over Russia supply fears (...) With exports from Ukraine and Russia at a virtual halt, wheat soared, with Chicago futures at the highest levels since 2008, when a spike in grain prices triggered protests and riots in Africa, Asia and Latin America.
didn't see that many journalists and opinion pieces mentioning this side of the sanctions, i.e. what negative effects they will have on us.
Interesting. I don't read a lot of opinion pieces, but I can't recall an article that didn't point out that cutting SWIFT off to the Russians wouldn't have negative implications for the West. Those would be from sources such as Reuters, BBC, Axios, NYT, New Yorker, Atlantic, etc.
Peter Zeihan had a good video on this on the night after the invasion. There’s a lot of possibly nasty, and somewhat likely side effects other than nuclear war. For example, Russia is the largest exporter of fertilizers (iirc).
This was a predictable outcome. Cutting off SWIFT access forced Russia to CIPS. Where does this lead? Strengthening CIPS with this move surely weakens the dollar's reserve status globally.
Are you serious? Dollar is free floating as there is no central bank deciding monetary policy? Who's printing all the money, and buying in the stock market, and have us witness the 7% inflation? Chinese Yuan is only different in a sense they consider USD's relative value in their monetary policy, while the Feds mostly cared about other factors.
The peg is only to keep it from strengthening (unlike some countries that try to keep their currency from sinking). Depending on which country is trying to use yuan as a reserve currency (export based economies vs import based ones), they might actually find this feature useful to stay competitive.
I think the dollar has never looked better actually.
Who from "the West" is going to consider major investments in China now? If by some miracle you manage to keep your IP secure, you risk losing your entire investment if/when the world gets tired of their support for the facists in Russia.
>Who from "the West" is going to consider major investments in China now?
People have been saying this for more than 10 years. As long as interest rates remain low and China continues to grow, there will be plenty of western money flowing in.
Which system would you trust? SWIFT or something controlled by China? I have a feeling the China based system would be used far more often politically than SWIFT ever would, especially against those that China deemed to be problematic to them.
>especially against those that China deemed to be problematic to them.
I don’t see how this is any different than what the US has already done. The US has now cut off Iran and Russia from SWIFT in political moves. Any nation state is likely already doing the calculus.
it won't be a matter of trusting one over the other; smart thing banks will do is register accounts with as many payments systems as are available, in order to mitigate unforeseen future risk.
Chinese banks still need SWIFT, and if we find any Chinese banks using CIPS to do business with sanctioned Russian entities, they will get cut off too and now both Chinese and Russian banks will be screwed.
Russian bank -> disposable temporary bank -> permanent chinese bank
That way the disposable temporary bank is the one that's blacklisted, while the permanent one never did business with the sanctioned entity (directly).
> Strengthening CIPS with this move surely weakens the dollar's reserve status globally.
No it doesn't. That's a fantasy held primarily by people that dislike the US, the present world order, and want it all rearranged to their bias. You can instantly spot a person's bias by how quickly they whip out the premise that the USD global reserve is going to be damaged by xyz (it seems to practically be a fetish for some people). Typically there's no actual argument presented, just a statement that of course xyz will happen now, finally. You'll see that throughout the Russia war threads (here or elsewhere). Throughout my lifetime I've seen it repeatedly claimed: well of course, now the USD global reserve standard will begin to decline (the Euro was supposed to severely damage it; whoops).
The vast majority of the world isn't going to have a strong interest in holding Yuan and that'll define the global reserve status. There are no other major competitors to the USD other than potentially the Yuan, and it's not a serious competitor because of the nature of the CCP. As it is, the Yuan has a smaller presence globally than the Yen and that says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade).
> says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade).
Yeah. I really wonder about this: The Chinese are doing everything possible to undermine their Yuan as a reserve currency. You can't freely move money. You can't open a Yuan denominated bank account easily. Their cards are hard to get/use (although some places are opening up). They didn't make a Stripe/Processing equivalent and open it to the rest of the world. You can't incorporate a Chinese company online and opening a Chinese company is a ridiculous process. English is still not widely used.
And has anybody checked the ICBC online-banking solution? These guys are still living in the 90s?
Most people think China is advanced in payments because they have wepay. But they seem to have just that and everything else (under State control) is still in the Soviet Era.
>No it doesn't. That's a fantasy held primarily by people that dislike the US, the present world order, and want it all rearranged to their bias. You can instantly spot a person's bias by how quickly they whip out the premise that the USD global reserve is going to be damaged by xyz (it seems to practically be a fetish for some people).
My personal tipoff is how quickly someone mentions "petrodollar".
No, idiot, countries don't use the US dollar to buy and sell oil because the US military points a gun at them. They use the dollar because they, their trading partners, and everyone else prefer having dollars to rubles, renminbi, or bolivars.
It's unclear to me how China acting in cooperation with Russia and to the detriment of the intended outcomes of sanctions is not seen as a thematically aggressive move?
China is concerned only with itself, they obviously don’t care about Ukraine but are eager to loot the sanctioned economy of Russia. The coalescing of Western interests and reinvigorated NATO are not in their favor of course, but are no existential threat.
Ultimately, I don’t think that’s necessarily a bad thing. Democracy would be ideal, but I’d rather see Russia utterly dependent on Beijing than autocratic and warmongering as they are now.
A North Korea-like Russia except actually militarily aggressive doesn't benefit the West. It benefits China because it keeps us distracted while they increase their global influence through BRI and other programs.
I suspect that this was considered an acceptable outcome: the U.S. and European governments certainly don't see eye to eye with China but China is more stable, less beholden to the whims of one person and tends to be somewhat more willing to consider the long-term ramifications of things like climate change. I think that a fair number of people would consider Russia falling into the Chinese orbit preferable to Putin's constant provocations.
This is why countries were originally reluctant to remove Russia from Swift. The US was afraid that it would reduce world trade in USD. Then it became a PR nightmare so they did it.
Readit News
https://en.wikipedia.org/wiki/List_of_the_largest_trading_pa...
China is a large economy but it's nothing like the dominant force many people seem to think. China is 16% of US trade, 22% of EU trade, 22% of Japan's trade, 22% of South Korea's trade, etc... the numbers are the same for just about everyone.
If you add up all the West-aligned countries (including Vietnam, Philippines, etc - they're already in a cold war with China over the South China Sea), you're looking at 80-90% of China's total trade volume.
Without some kind of major political split in the dollarized world, China just doesn't have that kind of leverage. We're currently seeing the opposite of that split.
I'm not sure where you get this idea that they are US aligned. This is specifically against their policy. They play a very balanced game as they should given their big neighbour...
https://thediplomat.com/2019/01/vietnams-defense-policy-of-n...
You seem to think of those percentage as small - they represent the largest trading partner of each of those country/entity.
I say that the current currency and banking sanctions are a one use tool - it is effective in the short term at hurting the russian economy, but the west will be paying a future price for it, one where the west's currency and institutions are trusted less than it would have been had they not done this.
You can argue that these sanctions are preferable to war. After all, any war with russia and the west will be nuclear, without a doubt. So the west is choose the lesser of two evils to deploy. But i'm not so sure that nuclear war is not averted.
Based on what we see today, what would be the economic consequences for that kind of adventurism? Who wants to hold the currency of a nation that is one jingoistic decision away from receiving the Russia treatment?
That said, I do think the world's strong reaction to Russia - whether or not it ultimately makes a difference in Ukraine - has made the Taiwanese a lot safer. Unlike Putin, the CCP does seem to care about China's place in the world.
How about % of goods. How many % of our everyday goods are produced in China? Can we even live a normal life if China stop sending those products to us for a week, a month?
I don't understand how more people are not catching up to this simple fact that central bank "digital currencies" are nothing more than a by-pass of distributed private banking (brick and mortar + online banks). It's just moving more levers closer to central authorities.
It is especially towards those part of the ISO 20022 [0] standard which the technologies will be based on some cryptocurrency technologies like Stellar [1][2], XRPL [3][4], Algorand, etc.
[0] https://finance.yahoo.com/news/iso-20022-cryptos-5-compliant...
[1] https://www.coindesk.com/policy/2021/12/14/ukraine-commercia...
[2] https://resources.stellar.org/stellar-for-cbdcs
[3] https://ripple.com/insights/bhutan-advances-financial-inclus...
[4] https://ripple.com/insights/ripple-joins-the-digital-pound-f...
Those accounts are still annoymous to both parties in transaction, not to the central bank. I would say it's much more annoymous than a traditional account, a credit card or debit card, but probably not as annoymous as cash.
Also, it's naturally fee-free, you don't pay ridiculous account maintenance or transaction fee.
-- Typically when I've seen authoritarian things it's authoritarian across most, but nice little exceptions for the "special" people.
Deleted Comment
The Chinese government most likely can already see virtually all transactions made by the common Chinese folk, since WeChat/AliPay is very popular there.
Now when you have a cryptocurrency that uses an encrypted blockchain where the transactions are private and are only known by the sender and the receiver, then you know that the Chinese government will not like such a thing to be used since they know that the criminal gangs and scammers are most exactly going to use something like that with Signal E2EE and MobileCoin for their illegal activities.
Certainly, it is very easy to hide your laundered digital cash on MobileCoin than it is on Bitcoin, or a stablecoin.
Deleted Comment
Funny, I could not imagine this happening
Two weeks ago they'd just pull out their Visa/MasterCard, and since the restaurant and the Russian's bank are both in the Visa network, it gets taken care of that way. Visa and MasterCard are blocking service to sanctioned Russian banks, which explains why Russians are busy going to the ATM to pull out cash.
China has their own network called UnionPay, so those banks have probably been calling them to join this last week.
I can imagine that Russians will also install AliPay or WeChat.
VISA and MC has nothing to do with lines to the ATM for cash. We have MIR system that works without any problem within Russia and works with Apple\Google\Whatever Pay too.
People just afraid their money can be taken away.
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Deleted Comment
Edit: I wonder if China greenlit the invasion precisely because they understand that this will hand them total control of Russia. Putin is a fool who may have been played.
Russia's elite may actually fare very well in the long term, since it'll be similar to how the USA props up the Saudi royal family in exchange for their ability to pump oil and regulate the market price. Russia's people will find themselves more and more disempowered and the country will continue to suffer massive brain drain.
> Commodity prices soar to highest level since 2008 over Russia supply fears (...) With exports from Ukraine and Russia at a virtual halt, wheat soared, with Chicago futures at the highest levels since 2008, when a spike in grain prices triggered protests and riots in Africa, Asia and Latin America.
didn't see that many journalists and opinion pieces mentioning this side of the sanctions, i.e. what negative effects they will have on us.
[1] https://archive.ph/Z3RM9
[1] https://en.wikipedia.org/wiki/List_of_countries_by_wheat_exp...
Dead Comment
https://en.wikipedia.org/wiki/Renminbi#Managed_float
https://en.wikipedia.org/wiki/Renminbi_currency_value#Intern...
https://en.wikipedia.org/wiki/European_Exchange_Rate_Mechani...
Who from "the West" is going to consider major investments in China now? If by some miracle you manage to keep your IP secure, you risk losing your entire investment if/when the world gets tired of their support for the facists in Russia.
[edit] since I wrote this comment....
https://twitter.com/jakluge/status/1499373653372420099
Who? Those who want to make money.
People have been saying this for more than 10 years. As long as interest rates remain low and China continues to grow, there will be plenty of western money flowing in.
Meanwhile in China, inflation is less than 1.5%, interest for money market fund is 2.4%.
You earn risk-free 0.9% if you hold them in CNY. You lose 7% if you hold them in USD.
Your choice now?
Deleted Comment
This was an unstated policy goal. Russia as a regional power is provably dangerous. As a Chinese vassal, at least it’s contained.
Add to that the significant costs to the American economy dollar hegemony has brought [1], and this is broadly a win-win-win.
[1] https://www.wsj.com/amp/articles/how-the-reserve-dollar-harm...
I don’t see how this is any different than what the US has already done. The US has now cut off Iran and Russia from SWIFT in political moves. Any nation state is likely already doing the calculus.
Russian bank -> disposable temporary bank -> permanent chinese bank
That way the disposable temporary bank is the one that's blacklisted, while the permanent one never did business with the sanctioned entity (directly).
No it doesn't. That's a fantasy held primarily by people that dislike the US, the present world order, and want it all rearranged to their bias. You can instantly spot a person's bias by how quickly they whip out the premise that the USD global reserve is going to be damaged by xyz (it seems to practically be a fetish for some people). Typically there's no actual argument presented, just a statement that of course xyz will happen now, finally. You'll see that throughout the Russia war threads (here or elsewhere). Throughout my lifetime I've seen it repeatedly claimed: well of course, now the USD global reserve standard will begin to decline (the Euro was supposed to severely damage it; whoops).
The vast majority of the world isn't going to have a strong interest in holding Yuan and that'll define the global reserve status. There are no other major competitors to the USD other than potentially the Yuan, and it's not a serious competitor because of the nature of the CCP. As it is, the Yuan has a smaller presence globally than the Yen and that says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade).
Yeah. I really wonder about this: The Chinese are doing everything possible to undermine their Yuan as a reserve currency. You can't freely move money. You can't open a Yuan denominated bank account easily. Their cards are hard to get/use (although some places are opening up). They didn't make a Stripe/Processing equivalent and open it to the rest of the world. You can't incorporate a Chinese company online and opening a Chinese company is a ridiculous process. English is still not widely used.
And has anybody checked the ICBC online-banking solution? These guys are still living in the 90s?
Most people think China is advanced in payments because they have wepay. But they seem to have just that and everything else (under State control) is still in the Soviet Era.
My personal tipoff is how quickly someone mentions "petrodollar".
No, idiot, countries don't use the US dollar to buy and sell oil because the US military points a gun at them. They use the dollar because they, their trading partners, and everyone else prefer having dollars to rubles, renminbi, or bolivars.
The Friend of my enemy is my enemy.
Ultimately, I don’t think that’s necessarily a bad thing. Democracy would be ideal, but I’d rather see Russia utterly dependent on Beijing than autocratic and warmongering as they are now.