🔌🇨🇳🇮🇳CIN 19 - What does 200 Digital Yuan buy?🧧🏦
Plus: the Desi Chinese Project archiving the stories of the Chinese community in India.
ChinaIndia Networked is a newsletter by me, Dev Lewis, highlighting the networked relationship between the two regions at the intersection of technology, society, and politics. Follow me on Twitter @devlewis18 or write to me at firstname.lastname@example.org.
Welcome to issue #19 of the newsletter.
We’re into the final few months of 2020 although it feels like many years have passed since January. It may get even longer with the US elections due in less than a month.
Here in China, we live in a COVID-free bubble, where the new normal is very much like the old normal as far as daily life is concerned.
While on one level I’m super grateful it comes at a price. International travel is a thing of the past due to a combination of strictly enforced 14-day quarantine at a hotel on return and limited / prohibitively expensive flight tickets. The only flight between China and India is a 1-way Indian government-run Vande Bharat flight meant for stranded folk who need to get home. This tends to be the case with a lot of other countries in the region that have contained the virus. With the pressure to keep COVID out is so high that after a cluster of just 13 local cases they tested the entire city of Qingdao (10.8 million) within a week(!) hard to see any significant change until the entire country has vaccine immunity.
Wherever you are, I hope you are able to mentally and physically okay. Dont forget to scroll till the end for music.
Final call- 📲Survey: Wechat Users in India
A group of researchers and I are trying to gauge what the Wechat ban looks like at the ground level and how it is affecting Indians with ties to China. Blocking websites/apps in India is not uniform and varies across Internet Service Providers and even though Tencent said it voluntarily pulled service to Indian users in compliance with Indian law, we hear its a lot more porous.
🙏🏼If you are based in India and use/used Wechat we want to hear from you. Its mostly multiple choice answers and should take you <2 minutes to complete.
🧧Is Digital Yuan heading for Wechat’s & Alipay’s lunch?
50,000 Shenzhen residents, the lucky few picked from over a million residents who applied for the lottery, each received 200 Digital RMB in their shiny new Digital RMB apps. They have about a week to spend the money at about 3389 certified merchants in the Luohu district in Shenzhen, one of the 4 pilot areas.
We’ve known that the People’s Bank of China (PBOC), China’s central bank, has been working on using blockchain technology since 2014, and Xi Jinping himself has vouched for the tech, as issue #5 of this newsletter covered back in 2019 when the Central Bank began testing what is called Digital Currency Electronic Payment (DCEP) with banks. Now it’s expanding this to end-users.
This week personal accounts of using Digital RMB began to surface online.
Stripped off its hype the experience for paying is virtually the same as using Wechat or Alipay: scan the QR code using the app, authorise, and presto!
As far as the user experience one difference is it supports ‘touch transfer 碰一碰’ i.e. it just needs the two devices to be next to each other no internet connection required. But the real difference is the plumbing behind the Digital RMB distinct from just electronic cash in your bank account/wallet.
To make DCEP function more like cash, the PBoC invented a system called “loosely coupled account links.” In traditional electronic payment systems, a transaction can only happen between two banking accounts; in the DCEP system, transactions can happen between two DCEP wallets, despite neither being associated with a bank account. This direct transaction functions like cash because it removes financial intermediaries such as banks and fintech giants from the transaction. (via Decrypt)
Digital Yuan can provide a number of features and programs that can be embedded into the currency for different levels of users—so banks or people. We’re still in the early days and one imagines this is where interesting use cases that leverage these programs may emerge.
Banks & Beijing fighting back?
Digital RMB may be eying Wechat and Alipay’s lunch. After all, when it’s a lavish lunch—201 trillion RMB worth of transactions per year—who wouldn’t want a share if they could?
Ant Financial has developed into a fintech behemoth capable of doing the kind of lending and risk profiling most banks can only dream of. The Economist’s recent profile of Ant Financial as it prepares for what is expected to be the world’s largest IPO explains:
“They don’t need quarterly statements. They see your daily flow of funds. They know who your customer is. They know who your customer’s customer is,” says one. Based on the address for e-commerce deliveries, Ant has more up-to-date information about where someone lives and works than a bank. Based on what that person buys, Ant can work out their income bracket and their habits, preferences and way of life.
Payments are central to their ecosystem and this rich payment data is exactly what Chinese banks have been starved off ever since Jack Ma famously disrupted the banks more than a decade ago. For instance, the central bank’s own credit rating system says it lacks the complete data of nearly 400 million people. In recent years Beijing has made a number of moves in an attempt to get fintech giants in line.
In 2017 they declined to give Ant Financial (among others) a license to issue credit reports and coaxed the creation of Baihang Credit—a “public-private” entity created to serve the function of breaking proprietary silos and pooling private and public financial data towards issuing credit reports. Baihang went live in January this year with the first version of its credit report but it struggles coopting data from Ant Financial and Tencent. I’ve written previously how the mirage of harmony between the state and platforms hides deep mistrust and power struggle behind the scenes.
If they can’t co-opt the companies why not go directly to the consumers, using a combination of incentives and state power to nudge citizens towards using Digital RMB network instead?
Of course, it’s not head-on adversarial. Both Wechat and Alipay are part of the financial institutions working with the Central Bank, Alibaba has filed 5 patents in conjunction with DCEP. In a recent report, ASPI’s Fergus Ryan and Alexandra Pasco ASPI discussed the role of competition.
How those institutions distribute DC/EP will be the subject of a ‘horse race’ between the commercial banks and the TPPIs(third party payment institutes), the eventual frontrunner of which will ‘take the whole market’, the head of the PBoC Digital Currency Research Institute, Mu Changchun, told an audience in Hong Kong in 2019.69 That echoed comments made in 2018 by PBoC Deputy Governor Fan Yifei, who wrote that the central bank could leverage market forces to optimise related systems through close cooperation with commercial banks and other organisations, without imposing any prescriptive technology path in advance. This would facilitate resource integration, synergistic collaborations and innovation, as well
Right now this is a very limited version of the payment network and trials are expected to continue for the next few years as it begins to scale domestically, let alone be exchangable internationally. But theres definitely there’s plenty of room to speculate on the implications on for Chinese international loans, financial surveillance, and global power dynamics.
Desi Chinese Project- the untold story of the Chinese community in India
Desi Chinese are Indians of Chinese ancestry whose ancestors came to India hundreds of years ago and settled here. Their children and the children after them were born in India and we are calling them here as Desi Chinese or Indian Chinese.
Check out this new project meticulously archiving untold stories from a community that have experienced both the best and the worst of India—of which we know so little about. The website is rich with stories and multimedia, created by Lawrence and Jennifer Liang, Jenny Pinto, Vidura Bahadur, and Koel Chatterjee.
Two of my favourite pieces from the week past
Cant wait to get my hands on Xiaowei Wang’s new book Blockchain Chicken Farm.
🧠🎛Ears & Minds Networked
One album from the independent music scene around the region—because if you’re interested in China and not listening to music coming out of here you’re not doing it right.
DOC (Dalian Obscure Club)
Come for the soothing tunes, stay for the drone footage of the idyllic Dalian seaside.
Thanks for reading till the end! Have a fantastic week ahead.