NIAS Area Studies
PAKISTAN READER
Photo : Reuters
IN FOCUS
By Dincy Adlakha
Cryptocurrency in China: a transitory story
Recent developments
On 8 November, Huobi Group which is a leading cryptocurrency trending company in China moved its operations to Gibraltar. Huobi is not the first cryptocurrency trading firm in China that has shifted its centres to a foreign destination. The co-founder of the group said in a statement: “the cryptocurrency industry is constantly growing, and the company needs to align its business in accordance with the challenges that appear in its way.” He also emphasized that ever since the group lost Chinese consumers due to the cryptocurrency ban in China, it needed to “go global” to make up for the gap.
On 3 November, Reuters reported that approximately 140 million people had opened “wallets” for the new digital yuan system which is expected to be launched soon. These e-wallets have already seen USD 9.7 billion worth transactions.
Status of cryptocurrency in China
Traditionally, China has been one of the biggest markets for cryptocurrency in the world. Due to its comparatively lower energy prices, a major sector of cryptocurrency mining and trading took place in China earlier. However, in 2019 China officially banned cryptocurrency trading in the country. It continued only through foreign trading channels. As a result, China’s account for world energy consumption for bitcoin fell from 75 per cent in September 2019 to 46 per cent in April 2021.
Furthermore, three state owned financial and payment association bodies in China laid down guidelines in May 2021 to reiterate the ban on cryptocurrency and urged people to not invest in crypto industry due to the speculative nature of the activity. They also said that they will not bear any protections for individuals who continue to trade currencies online. In June, the central bank in China called on other banks and payment institutions to stop providing the services of cryptocurrency like opening accounts, transactions, settlements, and the like. In September, the Chinese authorities issued two notices aiming to eliminate cryptocurrency mining from the country.
The state concern against cryptocurrency
Governments across the globe are seeking to develop their national digital currencies to modernise the financial system and also protect the economy from competitive and volatile cryptocurrencies like Bitcoin. China’s efforts are the most advanced in this regard. Beijing has manifold concerns with cryptocurrency.
The first is to protect its economy from volatility and speculative trading leading to risks. Citizens converting their savings to crypto assets only to be hit with ransomware and digital attacks worries the government.
Secondly, China is also sceptical of a foreign currency with no stable owner affecting and controlling its domestic payment system. China cracked down on Ant Financial and other tech giants that attempted to dominate the domestic retail payments. Central bank money cannot be replaced as the primary tender for Beijing.
Third, the risk of avoiding cross-border financial flow regulations. Cryptocurrency can be used to evade restrictions and standard procedures for cross-border financial transactions. This will make it difficult for the government to manage the exchange rate.
Fourth, China’s emission reduction targets. Cryptocurrency is an energy-intensive industry as the mining of these digital coins takes place through powerful computers and networks. As the country aims to reduce its emissions and faces an energy crunch, it realizes that the industry is a major eater of its valuable energy.
Future of the industry in China
In the near future, many cryptocurrency firms can be seen shifting their operations to foreign havens that provide legislative oversight to such companies. El Salvador, Gibraltar, Estonia, Singapore, Frankfurt are some of the places that have received most of these shifting firms.
Additionally, China is set to launch its digital currency or eCNY. A push for this by the state and a larger usage of digital yuan is projected by Beijing through its current experiments.
References
“China crypto ban slashes revenues and spurs Huobi to ‘go global’ ,” Financial Times, 8 November 2021
“China Crypto Giant Moves Spot Trading Operations to Gibraltar,” Bloomberg, 8 November 2021
“$9.5 billion spent using Chinese central bank's digital currency – official,” Reuters, 3 November 2021
Eshwar Prasad, “China Has Good Reason to Fear Bitcoin,” Barron’s, 15 October 2021
“China declares all crypto-currency transactions illegal,” BBC, 24 September
IN BRIEF
By Keerthana Nambiar and Avishka Ashok
INTERNAL
The People’s Liberation Army prepares its forces at the India-China border for the cold winter
On 9 November 2021, Global Times reported that the Chinese military had upgraded its facilities at the India-China border in antici[ation of the harsh winter. The facilities were upgraded and several new measures were added to improve the living and working condition of the soldiers at the border. The report noted that China had an advantage over India in terms of providing high quality logistics to its Army. However, the report followed that the measure were undertaken only as a precaution and did not mean that there would be any large-scale skirmishes on the fragile border. (“PLA at China-India border has upgraded logistics to brave winter,” Global Times, 9 November 2021)
Premier signs decree on conservation and preservation of groundwater
On 9 November, Xinhua Net reported that the Chinese Premier Li Keqiang had signed a decree on the the management of groundwater. The new regulation which creates strict norms in the field of survey and planning, conservation and protection, over-exploitation treatment, pollution and control, and supervision and management will be implemented from 1 December. The new regulation mandates the authorities to regularly survey and monitor the quality and condition of the groundwater in all its locations. (“China unveils regulation on groundwater management,” Xinhua Net, 9 Novemeber 2021)
Northeast China faces record snowfall since 1905 due to blizzard
On 9 November, Xinhua Net reported that Northeast China saw the biggest snowfall since 1905 due to a lingering blizzard that has been affecting the weather conditions in the region since 7 November. The average snowfall in Shenyang city reached 51 mm. The weather department of the country also issued an alert in the Liaoning province after the snowstorms affected the roads and traffic. (“Blizzard brings record snowfall in NE China,” Xinhua Net, 9 November 2021)
Communist Party and State Council release circular to fight pollution and ecological degradation
On 9 November, Xinhua Net published a report on the circular issued by the Communist Part and the State Council on0 protecting and conserving the environment. The curcular showed China’s efforts in combating pollution and highlighted its major targets that aim to reduce the carbon emissions. The circular said: “"By 2025, carbon dioxide emissions per unit of the country's GDP will be reduced by 18 percent from the level in 2020." The circular further demanded cities having intensity of PM 2.5 pollutants to reduce its levels by 10 percent. (“China Focus: China doubles down on pollution fight with in-depth efforts,” Xinhua Net, 9 Novemnber 2021)
REGIONAL
China commits to make the South China Sea “a sea of peace, friendship, and cooperation”
On 9 November, Chinese State Councilor and Foreign Minister Wang Yi addressed the Symposium on Global Maritime Cooperation and Ocean Governance 2021 via a video link. Wang said, “We should jointly promote maritime connectivity and free trade to maintain the stability of maritime transport and industrial chains, and we should develop and utilize marine resources in an orderly manner and work together to address global challenges such as global warming and sea-level rises.” He further stated the importance of multilateralism, maritime connectivity, and free trade. China claims to be committed to expanding maritime cooperation, protecting the global maritime supply chains and tackling climate change to make the South China Sea into “a sea of peace, friendship, and cooperation.” (“China committed to maritime cooperation, tackling climate change in South China Sea amid US’ coercion of ASEAN,” Global Times, 9 November 2021)
Hong Kong pro-democracy activist denies participation in the Tiananmen Massacre
On 9 November, a Hong Kong pro-democracy activist Gwyneth Ho, who was accused of participation in the banned Tiananmen Massacre vigil denied the claims. Ho was acknowledged being in the park of the candlelight vigil claims that she was present in the park to show resistance to the police prohibition of the event rather than mourning the victims. Ho who is the vice-chairperson of the now-defunct Hong Kong Alliance was one of the many who were trialed for participating in the banned vigil in 2020. (“Hong Kong activist denies partaking in Tiananmen Massacre vigil, says she attended park to protest police ban,” Hong Kong Free Press, 10 November 2021)
INTERNATIONAL
China calls on US to promote global infrastructure cooperation
On 9 November, China’s Foreign Ministry Spokesperson Wang Wenbin made comments on the US administration’s plan to launch a global infrastructure program. US President Biden’s infrastructure plan is widely seen as a program intended to counter China’s Belt and Road Initiative. Wenbin remarked that “China believes there is wide room for global infrastructure cooperation and various initiatives don't have to counter or replace each other.” He further stated that countries should work with each other for win-win results rather than functioning in isolation urging the US to take “concrete actions” for global development.(“China urges U.S. to promote common world development with concrete actions,” Xinhua Net, 9 November 2021)
US delegation visits Taiwan to provide ‘administrative assistance’
On 9 November, a delegation of the US Congress members arrived in Taipei announced via US Navy aircraft. Taiwan’s Ministry of Foreign Affairs (MOFA) issued a statement responding to the questions raised by the media, whether the plane carried US lawmakers. The ministry reverted cryptically stating that the US delegation was in Taiwan for providing ‘administrative assistance’ on the epidemic prevention measures. Presidential Office Spokesperson Xavier Chang quoted that the visit was based, on the “mutual trust and coordination between Taiwan and the U.S.” (“Jet carrying US senators, congressmen makes surprise visit to Taiwan,” Taiwan News, 9 November 2021)