12 April 2021

Schools to Close in Mizoram Due to New Covid Cases


AIZAWL, Apr 12
:  The Mizoram Government has ordered closure of schools for students up to Class VIII following a surge in COVID-19 cases. Fresh guidelines issued last night said that the State Government has again banned night church service and extended the duration of night curfew by two hours in all the district headquarters, including the State capital as the second wave of COVID-19 has hit Mizoram. The curfew will now be in force from 8 pm to 4 am instead of 10 pm to 4 am.

However, ongoing examinations for classes IX to XII will continue as scheduled.

Schools for students of classes V to VIII had reopened on March 1 and for students of classes III and IV on April 1.

Classes in universities and colleges, however, will be subject to the decision taken by the State’s Higher and Technical Education Department, the order said.

Meanwhile, Mizoram today reported 25 new COVID-19 cases, taking the State’s tally to 4,583. Thirteen of the new patients are returnees from outside the State, while the rest have been locally infected.

The State currently has 115 active cases and 4,457 people have recovered from the infection. Eleven persons have succumbed to the virus so far.

A PTI report from Aizawl adds: Churches, cinema halls, auditoria, community halls, picnic spots and other places of entertainment like resorts are allowed to open with 50 per cent of their sitting capacity.

The number of attendees at a funeral, wedding and any social or political gathering was fixed at 50, the order said.

Shops, hotels, restaurants and other business establishments will open under strict adherence to COVID-19 protocols.

The guideline said that all returnees from other States would undergo rapid antigen tests and those testing negative would be placed under home isolation for seven days.

However, they will not require home quarantine if they test negative in RT-PCR and TrueNat laboratories.

Returnees from abroad or new COVID-19 variant-affected States will have to be quarantined at designated facilities. But if they have already stayed 10 days in the country after arriving and tested negative during screenings at the entry points here, they will be allowed seven days home isolation.

Quarantine is not mandatory for people who visit the State for a short stay not longer than 96 hours provided they possess a COVID-19 negative certificate not older than 96 hours upon their arrival in the State.

29 new cases push Mizoram's COVID-19 tally to 4,612


Aizawl, Apr 12
: At least 29 people, including three children and a CRPF employee, tested positive for COVID-19 in Mizoram on Sunday, taking the tally in the state to 4,612, an official said.

Of the new cases, 28 were reported from Aizawl and one from Mamit district, he said. Eight new patients have travel history, while four were detected during contact tracing and it is yet to be ascertained how the remaining 17 people have contracted the disease, the official said.

Mizoram now has 143 active cases, while 4,458 people have recovered from the virus and 11 died. The recovery rate among coronavirus patients in the northeastern state is currently at 96.66 per cent.

The state has so far tested 2,62,310 samples, including 1,582 on Saturday, and the positivity rate stands at 1.76 per cent.

Altogether, 70,523 people, including 21,137 senior citizens, have been administered the first dose of COVID-19 vaccine till Saturday, state immunisation officer Dr Lalzawmi said.

NSCN (IM) objects to Assam Rifles outpost near its Nagaland camp

The Isak-Muivah faction of the National Socialist Council of Nagaland or NSCN (IM) has objected to an outpost of the paramilitary Assam Rifles near its council headquarters at Hebron near Nagaland’s commercial hub Dimapur.

The outpost was set up in “blatant violation” of the ceasefire ground rules, the extremist group said in a statement issued on Saturday evening. The outfit had declared ceasefire with Indian armed forces in July 1997.

The publicity wing of the NSCN (IM) said one of the clauses in the ceasefire ground rules was that the Centre would not establish any base or facility of the armed forces on the Dimapur-Hebron road. It asked New Delhi to ensure that the peace agreement was respected by moving the Assam Rifles outpost out of the area.

“The checking of commuters at Doyapur (on the Dimapur-Hebron road) is completely against the ongoing and longest peaceful political negotiation… It has been almost two years since the Assam Rifles personnel began stationing at Doyapur,” the NSCN (IM) said, seeking the withdrawal of the outpost “in the larger interest of the Naga peace process”.

The Ministry of Home Affairs exercises control over the Assam Rifles, Indian’s oldest paramilitary force, but the officers of the force come from the Army.

The peace process between the Centre and NSCN (IM) has been hanging fire for more than two decades now. The talks appear to have been stuck on the issues of a separate flag and constitution for the Naga-inhabited areas.

China's plans for Himalayan super dam stoke fears in India

The structure will span the Brahmaputra River before the waterway leaves the Himalayas and flows into India, straddling the world's longest and deepest canyon
The structure will span the Brahmaputra River before the waterway leaves the Himalayas and flows into India, straddling the world's longest and deepest canyon STR AFP

Beijing: China is planning a mega dam in Tibet able to produce triple the electricity generated by the Three Gorges -- the world's largest power station -- stoking fears among environmentalists and in neighbouring India.

The structure will span the Brahmaputra River before the waterway leaves the Himalayas and flows into India, straddling the world's longest and deepest canyon at an altitude of more than 1,500 metres (4,900 feet).

The project in Tibet's Medog County is expected to dwarf the record-breaking Three Gorges Dam on the Yangtze River in central China, and is billed as able to produce 300 billion kilowatts of electricity each year.

It is mentioned in China's strategic 14th Five-Year Plan, unveiled in March at an annual rubber-stamp congress of the country's top lawmakers.

But the plan was short on details, a timeframe or budget.

The river, known as the Yarlung Tsangpo in Tibetan, is also home to two other projects far upstream, while six others are in the pipeline or under construction.

The "super-dam" however is in a league of its own.

Last October, the Tibet local government signed a "strategic cooperation agreement" with PowerChina, a public construction company specialising in hydroelectric projects.

A month later the head of PowerChina, Yan Zhiyong, partially unveiled the project to the Communist Youth League, the youth wing of China's ruling party.

Enthusiastic about "the world's richest region in terms of hydroelectric resources", Yan explained that the dam would draw its power from the huge drop of the river at this particular section.

- 'Really bad idea' -

Beijing may justify the massive project as an environmentally-friendly alternative to fossil fuels, but it risks provoking strong opposition from environmentalists in the same way as the Three Gorges Dam, built between 1994 and 2012.

The Three Gorges created a reservoir and displaced 1.4 million inhabitants upstream.

"Building a dam the size of the super-dam is likely a really bad idea for many reasons," said Brian Eyler, energy, water and sustainability program director at the Stimson Center, a US think tank.

Besides being known for seismic activity, the area also contains a unique biodiversity. The dam would block the migration of fish as well as sediment flow that enriches the soil during seasonal floods downstream, said Eyler.

There are both ecological and political risks, noted Tempa Gyaltsen Zamlha, an environmental policy specialist at the Tibet Policy Institute, a think tank linked to the Tibetan government-in-exile based in Dharamshala, India.

"We have a very rich Tibetan cultural heritage in those areas, and any dam construction would cause ecological destruction, submergence of parts of that region," he told AFP.

"Many local residents would be forced to leave their ancestral homes," he said, adding that the project will encourage migration of Han Chinese workers that "gradually becomes a permanent settlement".

- 'Water wars' -

New Delhi is also worried by the project.

The Chinese Communist Party is effectively in a position to control the origins of much of South Asia's water supply, analysts say.

"Water wars are a key component of such warfare because they allow China to leverage its upstream Tibet-centred power over the most essential natural resource," wrote political scientist Brahma Chellaney last month in the Times of India.

The risks of seismic activity would also make it a "ticking water bomb" for residents downstream, he warned.

In reaction to the dam idea, the Indian government has floated the prospect of building another dam on the Brahmaputra to shore up its own water reserves.

"There is still much time to negotiate with China about the future of the super-dam and its impacts," said Eyler.

"A poor outcome would see India build a dam downstream."

‘The Dictators Will Not Have Good Days Forever,’ Says Veteran Myanmar Activist


‘The Dictators Will Not Have Good Days Forever,’ Says Veteran Myanmar Activist Min Ko Naing, a Myanmar democracy activist and 88 Generation Students Group cofounder, speaks at a ceremony commemorating the 30th anniversary of an uprising against a former military junta, at Yangon University in Yangon, Aug. 8, 2018.

Democracy activist Min Ko Naing, who has has spent more than half of his 58 years opposing military dictatorship in Myanmar, has been on the run following the military coup on February 1 that overthrew the elected government led by Aung San Suu Kyi. A key leader of the student led protest on Aug. 8, 1988 at Yangon University, he spent 15 years in jail after his arrest in 1989, and founded the 88 Generation Students Group to pursue the goal of democracy. Arrested again in 2007 for organizing peaceful demonstrations in support of the Buddhist monk-led Saffron Revolution, he was sentenced to 65 years in prison in 2008, but was released under a mass pardon in 2012. Nearly two months after the current military junta charged Min Ko Naing and six others under section 505(b) for inciting unrest against the state, he spoke to Khin Maung Soe of RFA’s Burmese Service about the Committee Representing Pyidaungsu Hluttaw (CRPH), a group of elected lawmakers from the ousted National League for Democracy government that has emerged as country's "shadow government" to coordinate opposition to the military regime that has killed more than 700 people in the 10 weeks of protests across the country.

RFA: I hear you are now working with the Committee Representing Pyidaungsu Hluttaw (CRPH). Since when you were working together with CRPH and what are you doing?

Min Ko Naing: We have worked together with the MPs before the coup. After the coup, we have become determined to work together more closely. There are cases that the military’s State Administration Council and their informers are fabricating stories to make people distrust the CRPH. They are making deliberate attacks to damage the reputation of the CRPH. The CRPH has been rejuvenated with members of new generations. The CRPH is marching on under a collective leadership and holding collective responsibility. It is different from organizations built on the fame of a single leader. This collective leadership and responsibility have given us the robustness and the ability to think broadly. I am very pleased about that. I believe that we will see more concrete results soon. I want to ask everyone to have faith in them.

RFA: As the fight against the coup has been prolonged, the people, especially young people, are now becoming exhausted physically and mentally. They are financially starved and every day they are wondering what to do next. What advice do you have for them?

Min Ko Naing: I am very sympathetic to them. I have experienced the same things over 30 years ago. The revolution we pursued faced a brutal crackdown. They shot and killed so many people that the bodies were piling up in the street. At that time, we felt that we were totally lost. Now, I see the same things happening to young people. They don’t even have 500 or 1000 kyats in their pockets, but they are scraping by to keep things going. I’ve heard about them all. As I have said earlier, the CRPH should first consolidate a public administration. Then, they should work on the people’s security and then their defense. They should go to the territories where they can be safe. There are all kinds of training available in these territories. These territories will become ‘free zones’ where they can continue the fight against the military together with ethnic minorities. Those who remain in the cities will continue their fight by guerilla protests. The important thing is to keep showing our resistance.

RFA: Now, many young people are waiting to see the plan for a federal army materialize. What can you tell me about that?

Min Ko Naing: As we are establishing a federal union, the forces we employ should be federal army forces. How will we get there? We should take several steps. We don’t want that to take a long time. But we cannot skip the necessary steps. We should be quick and, at the same time, should meet certain standards. That’s why these young people should travel to the safe zones I have mentioned and they should join training programs. I think you know what kind of training I am talking about. They need to join hands with ethnic armed groups in these free zones. I cannot lay out the route to get to these safe zones on the map of Myanmar. They should check out what is the closest zone in your area and decide how to get there by themselves. Speaking from my experience, what we have learned about these places in prison is not very reliable because there are many informers among the detainees. We know the price to pay is high because we want to see enormous changes. So I want to reiterate that the processes of forming a federal army will not be lengthy, but we cannot skip the necessary steps.

RFA: The employees who are participating in the Civil Disobedience Movement (CDM) are also holding out as much as they can now. What do you think they should do next?

Min Ko Naing: Mainly, they need a guarantee for their future. I am sympathetic. The guarantee should be for both long-term and immediate needs. They need accommodations and food supplies, at the least. We are trying to meet these needs as much as we can. The CRPH has dedicated committees to address these issues. For the long term, we need to know how long we should be providing to these CDM employees. It depend on how much donors in the country and abroad can contribute. In fact, the government bureaucracy is in ruin now and they cannot function anymore. That’s why the military authorities are using both intimidation and incentives to break up the CDM movement. They have lost and the CDM movement has already won. Currently, the CRPH is assisting these employees. But our channels have been blocked at times. We are using all available channels to support them. If these CDM employees no longer feel safe living in their homes, they can go to one of these safe zones. People like Dr. Zaw Wai Soe or Dr. Win Myat Aye are helping them. We are all working to make the changes happen before the end of April. Take a look at the banks. Even if they are all reopened, they cannot be operational. People are withdrawing all the money they have in the bank.

RFA: How do you view international support for Myanmar?

Min Ko Naing: There are only two kinds of countries in the world: those who condone the dictatorship and those who support democracy. Take a look at the allies who support democracy. It is not just one or two countries that are supporting the movement in Myanmar. Many countries are teaming up to back up the fight for democracy in Myanmar. Now, there will be a hearing at the United Nations. Zin Mar Aung will be attending to testify. The UK, one of the permanent members of UN Security Council, is organizing that meeting. They invited her as an acting minister of the CRPH. UNSC members will hear the voice of the CRPH and they will carry it to other members. This is very important. It means that UNSC members have recognized the legitimacy of CRPH. The meeting will pressure the UNSC to take appropriate actions. The allied countries who support democracy are trying to prove that they have done everything they can. If they don’t succeed, they will use a different strategy. There are mechanisms like the IIMM (Independent Investigative Mechanism for Myanmar). They have requested evidence from the public. I learned that they have recorded over 270,000 pieces so far. They are archiving the strongest evidence.

RFA: What can we expect out of the movement in coming days?

Min Ko Naing: In the next few days, we are going to announce the formation of a National Unity Government (NUG). We have a shared vision of removing this terrorist military council. All sorts of organizations will be included in this government. We have been busy bees in the past few days. We have been negotiating with all the groups at home and abroad. In addition to the widely known ethnic armed groups, we are recruiting civic groups, and prominent actors, and so on. When it comes out, you will see how strong it is and how much support we have from our allies around the world. We also have plans to broadcast public TV programs. We have plans to disseminate the information through SMS messages even if internet connections are totally shutdown.

RFA: People are very concerned about the prospect of China influencing ASEAN to intervene in Myanmar. What do you think about that?

Min Ko Naing: Our people can clearly distinguish who are good friends and who have been exploiting us. We can see what the U.S. is doing now. They have teamed up with the Philippines, Malaysia and other countries to launch naval exercises. The dictators will not have good days forever. They will have bad days also. There will be good days for the truth of democracy. We have seen the military’s State Administration Council attempting to take control of our UK embassy. This is such a terrorist act. Everything they have done is wrong. Besides, take a look at the press tour they arranged with the CNN reporter. The world got to know more about their persecution. I strongly believe that the world will see the truth and the people will prevail. In the meantime, we have to persist and not break off the joining of hands.

Translated by Ye Kaung Myint Maung for RFA’s Myanmar Service.


Source: RFA

Rhino Numbers on the Rise: 16% increase in Nepal’s rhino numbers


Kathmandu, Nepal – Nepal’s rhino population has shown a promising 16% increment as indicated by the results of the National Rhino Count 2021 released by the Government of Nepal today. The current population of the species stands at 752 individuals compared to the 2015 estimate of 645 in Nepal’s Terai Arc Landscape. 

The National Rhino Count 2021 began on 22 March 2021 and concluded on April 10, 2021 covering rhino range areas within the country including Chitwan National Park, Parsa National Park, Bardia National Park, and Shuklaphanta National Park as well as their buffer zones and vicinities outside protected areas.
The count was led by the Department of National Parks of Wildlife Conservation, mobilizing over 57 elephants and 350 technicians and trained personnel, sweeping parallelly across jungle blocks and documenting numbers based on a headcount. Populations estimates are based on individual rhino information collected, categorized based on statistics such as sex, age group, and unique identifying features. During the process, data on habitat conditions, invasive species in the area, and human activities in the region are also collected.
“The overall growth in population size is indicative of ongoing protection and habitat management efforts by protected area authorities despite challenging contexts these past years,” stated Ghana Gurung, Country Representative of WWF Nepal. “This achievement is yet another milestone in Nepal’s conservation journey showcasing the impact of concerted efforts of all stakeholders and providing much needed impetus to the global conservation fraternity.”

The count was conducted in collaboration with the Department of Forests and Soil Conservation, Nepal Army, Buffer Zone Users Committee, Community Forest Users Groups, NTNC, WWF Nepal, ZSL Nepal and other local organizations.
Every five years, Nepal takes up the immense task of counting its rhinos to monitor their status in the wild. The rhino count supports the assessment of management effectiveness in these regions and guides the nation’s rhino conservation strategy.

China's Digital Yuan Comes With An Expiration Date

 It's been a long time coming, and now it's almost here.

Last August we reported that China's Commerce Ministry had released fresh details of a pilot program for the country's central bank digital currency (CBDC) to be expanded to several metropolitan areas, including Guangdong-Hong Kong-Macao Greater Bay Area, Beijing-Tianjin-Hebei region, and Yangtze River Delta region. This was the inevitable culmination of a process which started back in 2014 when as we reported at the time, "China Readies Digital Currency, IMF Says "Extremely Beneficial".

Fast forward a few months when China's preparations to rollout a digital yuan gathered pace, and we reported in October that China was poised to give legal backing to the launch of its own sovereign digital currency, "cementing its trailblazer status in virtual currencies far ahead of other countries, after already recently experimenting with large-scale trials of actual payments by consumers, which was met with mixed results." Specifically, the South China Morning Post reported that "The People’s Bank of China published a draft law on Friday that would give legal status to the Digital Currency Electronic Payment (DCEP) system, and for the first time the digital yuan has been included and defined as part of the country’s sovereign fiat currency."

The design framework for the digital yuan had been released one year ago on the heels of Facebook's ambitious but disastrous Libra token rollout after founding corporate partners split for lack of confidence in the project and on fears US federal regulators would seek to block it just as they did encrypted-messaging company Telegram's Gram cryptocurrency.

"The draft law would also forbid any party from making or issuing yuan-backed digital tokens to replace the renminbi in the market," the SCMP said.

This in turn brought us to the so-called "Shenzhen case study"  when in October of 2020, China became the first nation to hold a trial run of its digital currency, when the government in Shenzhen carried out a lottery to give away a total of 10 million yuan (about $1.5 million) worth of the digital currency (nearly 2 million people applied and 50,000 people actually "won").

The winners were required to download a digital Renminbi app in order to receive a "red packet" worth 200 digital yuan ($30), which they can then spend at over 3,000 designated retailers in Shenzhen’s Luohu district, according to China Daily. After that, they’ll be able to buy goods from local pharmacies, supermarkets and even Walmart.

The idea was to not only test the technology involved, but boost consumer spending in the wake of the COVID-19 pandemic. In short, China is not only subsidizing the centrally-planned economy by manipulating the supply-side of the question- it now can prop up demand by handing out digital currency to anyone (or everyone).

Of course, unlike traditional central bank account-based currencies such as reserves, or decentralized cryptocurrencies like bitcoin, China’s digital currency would be controlled by the country’s central bank and will be instantly made available at a moment's notice to anyone who can receive it.

And since "China's adoption of digital central bank tokens is expected to be seamless as most of the nation's digital payments already pass through companies like TenCent and AliPay and are already very popular in the country", we concluded that "the successful Shenzhen test means that a broad rollout is just a matter of time."

Still, one thing was missing: a stamp of approval by the gatekeeper of not only the global payments system, but the protector of the dollar reserve system, SWIFT. But as two months ago, China got that too: as we reported in February, "SWIFT, the global system for financial messaging and cross-border payments, has set up a joint venture with the Chinese central bank’s digital currency research institute and clearing centre, in a sign that China is exploring global use of its planned digital yuan."

Actually, not just "exploring" but thanks to year of testing and partial rollouts, Beijing was about to become the first country in the world set to launch the digital yuan, and with both the IMF's and SWIFT's blessing, we said that it was "just a matter of months if not weeks."

We were right, because just a few days ago, China's "cyber yuan" became official when the WSJ finally caught up, writing "China Creates Its Own Digital Currency, a First for Major Economy."

While regular Zero Hedge readers are quite familiar with the details and chronology of China's transition to a digital currency, which incidentally is precisely the opposite of a cryptocurrency and has absolutely nothing to do with Bitcoin, a fact which Peter Thiel may want to dwell on a little more next time before making sweep and wrong statements about bitcoin, the WSJ focuses more on the geopolitical reasons of China's currency evolution - as a reminder, thousand years ago, when money meant coins, China invented paper currency, and now the Chinese government is minting cash digitally, in what the WSJ said is a "re-imagination of money that could shake a pillar of American power" - and specifically how to approach a decoupling from the global reserve currency, the US dollar so not only can Beijing avoid the "nuclear option", a weaponized US dollar, but allow countries that the US seeks to punish like Iran, a viable alternative (remember, the enemies of China's enemies - and none is bigger than the US - is China's friend). Here is the WSJ:

The U.S., as the issuer of dollars that the world’s more than 21,000 banks need to do business, has long demanded insight into major cross-border currency movements. This gives Washington the ability to freeze individuals and institutions out of the global financial system by barring banks from doing transactions with them, a practice criticized as “dollar weaponization.”


The digital yuan could give those the U.S. seeks to penalize a way to exchange money without U.S. knowledge. Exchanges wouldn’t need to use SWIFT, the messaging network that is used in money transfers between commercial banks and that can be monitored by the U.S. government.

To be sure, a credible alternative to the dollar, reduces the need to hoard the currency for US trade partners which in turn would have profound implications on global saving patterns, from there, global capital flows. The consequences for the perpetual US current account deficit would be unprecedented.

In addition to realigining the global balance of monetary power virtually overnight, China's the digital currency kills another bird with the same binary stone: it allows unprecedented surveillance and supervision over every single transaction.

[The digital yuan is] also trackable, adding another tool to China’s heavy state surveillance. The government deploys hundreds of millions of facial-recognition cameras to monitor its population, sometimes using them to levy fines for activities such as jaywalking. A digital currency would make it possible to both mete out and collect fines as soon as an infraction was detected.

A burst of cash-accumulation in China last year indicates residents’ concern about the central bank’s eye on every transaction. Song Ke, a finance professor at Renmin University in Beijing, told a recent conference that China’s measure of yuan in circulation, or cash, popped up 10% in 2020.

Then there are the myriad boosts to China's ironclad capital controls:

While China hasn’t published final legislation for the program, the central bank says it may initially impose limits on how much digital yuan individuals can keep on their person, as a way to control how it circulates and provide users a dose of security and privacy.

To be sure, none of this is actually new as we have discussed all these nuances of the digital yuan before. What is now, is this blurb in the WSJ article:

The money itself is programmable. Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump start.

And there you have it: the Keynesian wet dream to boost the velocity of mean finally comes true. For the past decade we have joked that it is only a matter of time before central banks slap on an expiration date on every monetary unit in circulation...

... to offset the creeping petrification of the monetary system, where negative rates have sparked even more saving and not spending as central banks had intended...

... and where only the threat of money confiscation - which is what a monetary expiration date actually does - can spark aggressive spending, and eventually, runaway inflation.

Well, that's precisely what China is now ready to do... and it's only a matter of time before other central banks follow suit.  As a reminder, according to tentative estimates for the rollout of ISO 20022, which is the required universal transaction standard which will make payment in digital currencies possible, we are looking at a 2022 launch date, although China looks ready to go live as soon as this year.

There is one final, geopolitical reason behind China's decision to give its digital currency an expiration date: as Byrne Hobart writes,  "programmable money, tied to real-world identities, and universally tracked by a central bank, starts to look suspiciously like a substitute for the consumer of last resort. Every year that China gets richer, domestic consumption plays a bigger role (exports were 26% of China's GDP in 2010, and 18% last year). If domestic consumption can be tightly controlled, then it's a way to not just increase the volume of consumption but to control the variance of demand for the goods China produces. It's not yet enough to match the size and variability of global demand for China's exports, but every year it gets closer."

In short, while the US and China are both talking seriously about decoupling, the digital yuan - which is now a reality - indicates that China's government is not only more effectively planning for it, but will be the first to fully sever all ties with the US... when the moment comes.

Finally, for those who have missed our reporting on this fascinating issue, here again is Rabobank's Wim Boonstra explaining not only why China will be the first country to launch a digital currency but also looking at what happens next:

China Will Be The First Country To Launch A Digital Currency: What Happens Then

  • China may be the first major country to launch a central bank digital currency or CBDC
  • The Chinese CBDC, named DCEP, will strengthen the position of the central bank and help to further modernize the Chinese economy
  • The DCEP will probably also be available for China’s trade partners, to begin with Africa
  • The DCEP may strengthen the international position of the renminbi to the detriment of the euro
  • The arrival of the DCEP should be a strong wake-up call for Western, especially European, policymakers


Most central banks are busy preparing for the potential introduction of central bank digital currency (CBDC). CBDC is a digital currency issued by the central bank. It is sometimes referred to as a digital version of a bank note, but in many cases this is not correct. There are indeed many different potential variants.

So far, virtually all the central banks are keeping their options open as to whether a CBDC will ultimately appear.

China, where a far-reaching trial is under way, is the major exception. If this trial is successful, one can expect the Chinese CBDC to be introduced widely in the near future. China is therefore comfortably leading the way because the country has big ambitions for its digital currency. First, it should provide a sizable boost to the Chinese economy; second, it will concurrently further increase the Chinese government’s control of Chinese society; finally, the new currency is part of an ambitious plan to strengthen the international position of the renminbi, the Chinese currency, and potentially at the expense of the euro in particular. This Chinese decisiveness should spur European policymakers into action by further strengthening the euro.

China: from cash-based to almost completely cashless money in 10 years’ time

Not so long ago, retail payments in China were still almost entirely made in cash. There has been a revolution in payments traffic since that time, and China is now one of the leading countries in cashless payments. Unlike in other countries, such as the Netherlands and Sweden, in China this development did not originate from the banking system, but it was induced by a few key apps from relatively young Fintech companies such as WeChat (Tencent) and Alipay (Ant Financial). These parties, that form a kind of extra layer between the banks and their customers, now have a collective market share of more than 90% in Chinese payments cashless retail payments. The Chinese cashless payments system is already able to settle approximately 100,000 transactions per second.

The Chinese CBDC: DCEP

Against this background, the People’s Bank of China (PBoC), the Chinese central bank, has taken the initiative of developing its own digital currency known as the Digital Currency Electronic Payment (DCEP). Above all, the DCEP is a digital alternative to bank notes, although it has features that differ from cash in certain respects (see below). The DCEP does however have the same value as a renminbi.

The technology that can be used by the public for payments is based on traditional payment technology and not on blockchain technology. This is the only way to achieve the necessary scale. The aim is to reach a capacity of 300,000 transactions per second. The central bank might itself use blockchain, for example for wholesale transactions or settlements in DCEP between private banks. Although the DCEP is a cashless currency that will be held in an account with a private entity, there is also the possibility of using a token-based functionality on for example a chip to effect peer-to-peer payments, even where there is no Internet. This is especially needed for successful adoption in the rural areas of China. This token-based functionality will be widely used, as a result of which the DCEP will compete with cash. A sizable trial has been running for several months in which tens of thousands of people have been participating.

What does the PBoC want to achieve with the DCEP?

The PBoC has several objectives with the introduction of the DCEP.

Prevention of a monopoly in the payment system

The PBoC wants to prevent a situation in which WeChat and AliPay take over the Chinese payment system. It is concerned that the entire payment system will soon fall into the hands of these private parties. The DCEP therefore has to restrict the involvement of these parties and increase the role of the central bank in the payment system. It is even more likely that any key private firm will be prevented to become a dominant player, as ultimately China is not a ‘normal’ market economy (which explains Beijing's current crackdown on Ant Financial far better than just a feud between Xi Jinping and Jack Ma).

Promotion of financial inclusion and further reduction of the role played by cash

Highly efficient cashless payments dominate in large parts of China. But in the poorer regions, especially the rural areas, people have less access to banking services such as regular credit. In these areas, cash still plays an important role. Payments in the criminal underworld, including the illegal gambling industry, are also still largely made in cash. The DCEP will offer people in these regions full access to financial services, but it can also reduce the importance of cash payments. The main aim of the DCEP is therefore to replace cash. In terms of features, it will also closely resemble cash.

Better information on payment flows and prevention of illegal transactions

Unlike payment transactions using a bank account, which by definition leave traces in a bank’s records, cash payments are highly anonymous. As we have said, the DCEP will closely resemble cash, with the possibility of making payments directly from one person to another. Some degree of anonymity would thus appear to be safeguarded. But on further consideration, it becomes clear that the PBoC, and therefore the Chinese government, will have full insight.

To be precise, in a transaction between two people effected with DCEP, anonymity between these two people will be assured, as is the case with a cash payment. But the PBoC can always establish at a later date who were involved in the transaction. This will enable more effective tracing of illegal transactions than if these were effected in cash. But there will also be detailed insight into the payment behavior of individuals.

Restricting capital flight

Although China does not have free cross-border capital movements, capital flight is a common and substantial phenomenon. Capital flight can occur in various ways, and is often difficult to trace. For example, internationally trading Chinese companies can for instance manipulate invoices, as a result of which money can be transferred abroad. People can also use the Bitcoin system to hide money from the authorities and/or transfer it abroad.

The Chinese government, like its counterparts in Europe and the US, is concerned that stablecoins could assume an important role as an alternative to the regular money in circulation, but also may develop into a vehicle for capital flight (read "How The Chinese Use Illegal Online Gambling And Tether To Launder Over $1 Trillion Yuan"). Stablecoins are cryptos like Bitcoin, but unlike Bitcoin they are, at least in theory, secured by financial assets. When Facebook announced in April 2020 that it intends to add national stablecoins to its Libra, a digital currency basket that it announced in 2019, central banks reacted immediately by devoting more urgent attention to CBDC.23 Such stablecoins could for example create the possibility that people could use a Libra-stablecoin to transfer money abroad. With the DCEP, the PBoC intends to slow the momentum of private stablecoins. This is also an important consideration for the Western central banks.

Retention of monetary sovereignty

This is connected with the previous point. If people have easy access to a private stablecoin, it could actually in a sense reduce the role of the national currency. Something similar actually happened in Zimbabwe, where confidence in the national currency completely vanished as a result of hyperinflation and people turned en masse to foreign currencies such as US dollars and South African rand. In such a situation, the national central bank loses control of monetary conditions in its own country. Importantly, however, the DCEP could also be used by China to interfere with monetary sovereignty in other countries.

What about privacy?

The PBoC says it will respect the privacy of people and therefore the anonymity of the transactions but at the same time it says that DCEP will help it to detect illegal transactions. What this probably comes down to in practice is that people will be able to effect payments and retain anonymity between each other, but that the central bank will on the other hand be able to view the transactions. Anonymity will therefore not be guaranteed and the central bank will have much greater insight into people’s payment behaviour than it has at the moment. The DCEP will also have the status of legal tender. This means that Chinese residents will be obliged to accept the DCEP, as confirmed by various statements from the central bank on the issue (South China Morning Post, 10 November 2020). The DCEP is thus not really coming into being as a result of strong demand from the Chinese public, but it is being imposed on the population by the government. Moreover, the way the DCEP is designed, it may develop into a perfect vehicle for a quasi-command economy: it allows all transactions to be monitored, and opens the door for a retreat to a more Soviet model of banking, viz. banking under full state control.

Internationalization of the renminbi

The use of the renminbi in international transactions is still relatively limited, certainly in comparison with the dollar and the euro. But China is working steadily on increasing its usage, and even hopes that one day the renminbi can succeed the dollar as the global reserve currency. China sees the DCEP as an important vehicle for strengthening the renminbi’s international position, as foreigners will also be able to use the DCEP in transactions with China.

The benefit of this for China is that it can settle more of its international trade in (digital) renminbi. China has initially targeted Africa in this respect. Many African countries do not have fully convertible currencies and mutual trade is frequently settled in US dollars, which is expensive. China is aiming to achieve a situation in which African countries can use the DCEP not only in their trade with China, but will also use it for their domestic transactions. This is a good example of how China is aiming to position itself internationally and how various projects and institutions will cooperate under the direction of the government. The newest model of the Huawei smartphone indeed includes an app enabling payment in DCEP without the need for Internet (Eurasia). Huawei is currently already a leading telecoms provider in Africa, which gives China a head start. In other parts of the world, where Huawei is less dominant or even banned, it will off course be less simple for China to push the DCEP ahead.

Note that while China intends to strengthen its own monetary sovereignty with the DCEP, it clearly has no qualms regarding its use to undermine the monetary sovereignty of other countries. If not only a larger proportion of the trade between China and African countries but also part of intra-African trade could soon be settled in DCEP, therefore renminbi, international use of the Chinese currency will significantly increase. Note, that if a larger share of China’s international trade will be conducted in DCEP, it will also become more difficult for Chinese im- and exporters to use trade as a way to channel funds abroad. So it will held the Chinese government to reduce capital flight, although complete elimination of this phenomenon will not be possible.

Decision time: is the DCEP a wake-up call?

China is leading internationally with the introduction of CBDC, and is clearly moving in a different direction than many other countries considering a similar move. The debate in Europe is still mainly about the form the digital euro, its CBDC, should take, the question of whether there is consumer demand for it, and who should pay for it. The Chinese authorities are taking a more strategic approach, and most of all from the perspective of whether a digital currency can contribute to strengthening/entrenching China’s international position.

Assuming that the current Chinese trials are successful, we could very well see the DCEP appear as early as next year. This could be a significant step in the further movement of the Chinese economy towards cashless money. The payments system would be further strengthened by the DCEP, as this will prevent large private parties gaining a duopoly with the market power that this would entail. Financial inclusion would be improved in the underdeveloped areas, and everyone would have access to cashless money and the associated financial services that this would make possible. The black economy would be further reduced, and the Chinese government will have better insight (and control) of the payment behaviour of its citizens to an extent that we in the West would probably see as unacceptable. Lastly, the introduction of the DCEP can discourage capital flight and probably strengthen the renminbi’s international position.

All in all, the DCEP will certainly make a positive contribution to the further development of the Chinese economy. Although the DCEP looks to be less innovative than the CBDCs under consideration by the Western central banks in certain respects, the determination shown by China is undoubtedly impressive.

This Chinese resoluteness also shows that China is working very actively on strengthening the renminbi’s international position, with the central bank and companies such as Huawei working closely together to achieve this. While still a long way off, a scenario in which first parts of the African, but later maybe Asian, Latin American of even some European economies will use the renminbi for cross-border and in due course also domestic transactions is gradually becoming more plausible.

One may also expect China to try to get all countries involved in its Belt and Road Initiative to use the DCEP and therefore the renminbi. Today, the renminbi is still a small currency in comparison to the euro and most of all the dollar. But this situation could change if the DCEP becomes widely accepted. In the context of a situation in which the euro’s international position has more or less stagnated over the last decades, this is at the very least somewhat disconcerting.

Of course we may expect that, once the digital renminbi takes off and gains traction, other central banks will react strongly. Especially the US will be determined to hold on to the dollar’s international dominance. The US authorities will soon understand that a successful digital renminbi may in the long run turn out to be a larger threat to the position of the dollar than the euro ever was. The most important difference is that the euro is institutionally weak and European politicians have so far failed to use their currency as a geopolitical instrument. The Chinese government, in contrast, understand very well the power of money as a ‘peaceful’ instrument to increase international political clout.

But after all the good news may be, that the DCEP also turns out to be the important wake-up call that prompts European policymakers to finally devote serious attention to strengthening the international role of the euro. Having the second currency after the US dollar is maybe not optimal, but is not disastrous. Being third after the Chinese renminbi is a different story. In the end, money talks.

* * *

Appendix: what will the DCEP look like?

The exact design of the DCEP is still not clear. According to the BIS, the DCEP will be what is known as a hybrid CBDC. People will hold balances in their names at the central bank, but transactions will be approved using an intermediate layer of private parties (possibly including commercial banks). There will then be no direct interaction between the central bank and the account holders, but people will have an account in their names at the central bank. This would be similar to the ideas being mooted at other central banks such as the ECB and the Bank of England. Bloomberg, Blockchain News and the China Daily on the other hand describe the DCEP as a two-tier system, in which people will not directly hold accounts with the PBoC. According to these reports, in the Chinese system people will hold only a DCEP account with a bank or, more likely, with a payment service provider. These parties will in turn hold a balance with the PBoC as a liquidity reserve that exactly covers the amount of DCEP. They will also settle interbank payments in DCEP. This kind of system is also known as a synthetic CBDC (sCBDC), as people will not have their own CBDC accounts with the central bank. The PBoC will however receive regular statements of effected transactions.

If this last model is adopted, the Chinese CBDC model would be more like a full (liquidity) reserve bank than a real CBDC. A full liquidity reserve bank is a bank that would hold a 100% cash reserve with the central bank against the CBDC payment accounts held with it. But in the Chinese model, there would be no additional institution created, the existing financial institutions would offer additional accounts that would then be 100% backed by central bank reserves. Statements from the PBoC also suggest the direction is more towards a synthetic model. Technically speaking, this would represent a less innovative move than a true CBDC.


source: Zerohedge

Alibaba Fined, Thanks Regulators...

China Giveth, China Taketh away....


Chinese regulators have fined Alibaba 18 billion yuan ($2.75 billion) - around 4% of its revenues in 2019 - for violating anti-monopoly rules and abusing its dominant market position.

The State Administration for Market Regulation has also ordered Alibaba to make "thorough rectifications" to strengthen internal compliance and protect consumer rights. ($1 = 6.5522 yuan)