Zhou Xiaochuan's latest speech: The internationalization of the renminbi is a "premature baby", and the central bank's digital currency is mainly focused on domestic

Source: 21st Century Business Herald

Introduction: The 10th Caixin Summit in 2019 was held in Beijing from November 7th to 10th.

Zhou Xiaochuan, president of the China Finance Association and former president of the People's Bank of China, attended and responded to some questions.

In response to a question "whether the central bank has a timetable for launching digital currency," Zhou Xiaochuan said: Some years ago, some banknote makers have proposed that the alternative of banknotes may be digital currency, but there is no Focus on the possibility of applying a blockchain or a distributed accounting system.

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The 10th Caixin Summit in 2019 was held in Beijing from November 7th to 10th with the theme of “Open China and the World”. Zhou Xiaochuan, president of the China Finance Association and former president of the People's Bank of China, attended and gave a speech.

So, what did Zhou Xiaochuan say?

Let's focus first:

The internationalization of the renminbi should be a gradual process. "And the renminbi is internationalized, I think it is a 'premature baby'. Originally, China did not intend to start pushing the renminbi internationalization in 2010 or around 2012, for example."

The central bank's digital currency will still focus on the country. "The central bank may focus more on wholesale, and do a wholesale of digital currency between banks and third-party payments.

Different government officials, central bank officials, and academic circles have different views on the possibility of the next round of financial crisis. Some people are more optimistic, others are more pessimistic. Pessimistic people believe that the next round of crisis is indeed a high probability, because there are many unhealthy phenomena in the global market. Therefore, we really need to prepare for the next round of financial risk control.

Talking about the internationalization of RMB

The internationalization of the renminbi is a "premature baby"

When answering "When can the RMB become a hard currency?" Zhou Xiaochuan first thought that the definition of hard currency itself was rather vague and there was no clear definition.

However, he believes that the renminbi's internationalization should be a gradual process. "And the renminbi is internationalized, I think it is a 'premature baby'. Originally, China did not intend to start pushing the renminbi internationalization in 2010 or around 2012," Zhou Xiaochuan revealed.

He said that due to the lack of liquidity after the global financial crisis, the use of local currency was caused by liquidity problems. At that time, China and some countries adopted a local currency exchange to support trade and investment settlement and ease liquidity problems.

"I remember that the reference at that time was called 'supporting the use of the renminbi in cross-border trade and investment', and later proposed at a higher level called 'renminbi internationalization'.

Zhou Xiaochuan emphasized that the internationalization of the renminbi is a gradual process, but it is indeed possible that there will be a big step. The first is because some economic crises may cause special demand. There is also a possibility that if there are problems in the world's major reserve currencies, it will provide different opportunities for the development of other currencies.

"There are also major reserve currency countries that will apply excessive financial sanctions. If you want to sanction, others will think of using other currencies, not only because of our own ideas, but also by the external environment."

Talking about the central bank digital currency

The central bank’s digital currency will still focus mainly on the country.

In response to a question "Does the central bank have a timetable for launching digital currency?" Zhou Xiaochuan said: Some years ago, some banknote makers have proposed that the alternative to banknotes may be digital currency, but There is no focus on the possibility of applying a blockchain or a distributed accounting system.

When talking about digital currency, Zhou Xiaochuan said that the private sector can participate in retail payments, and that third-party payments in China have also played a big role, and the development is also very fast, but the development of the basic electronic payment track is not based on blocks. Chain and distributed accounting based digital currency.

In its view, the central bank’s digital currency will still focus mainly on its own country.

“The central bank may focus more on wholesale, doing a wholesale of digital money between banks and third-party payments. But in theory, the digital currency of the central bank can also serve retail, but for retail services. It will have a big impact on the existing financial system, so everyone is very cautious."

Zhou Xiaochuan stressed that if the central bank's digital currency is to target cross-border transactions such as cross-border remittances and investments, then many new requirements must be met. "Not a central bank can manage it, and it may need a joint mechanism." .

He emphasized that the regulatory requirements for digital currency application and progress at different levels are different, and an organizational coordination mechanism is needed in the future. He cited anti-money laundering as an example. "Now the world attaches great importance to anti-money laundering and anti-terrorism financing. How anti-money laundering and anti-terrorism financing can be cut into every different level of payment system has become a huge challenge, which may significantly increase costs. At the same time, it will also reduce efficiency. But it is really necessary, because from a global perspective, such functions are now highly valued."

Talk about blockchain

The central bank chooses two systems to do the pilot

Zhou Xiaochuan revealed that during the digitization of banknotes, the central bank introduced some seminars to introduce blockchain and distributed ledger technology. However, in view of the application of the above technology, it is more suitable for trading links with less transaction volume. Therefore, the People's Bank of China has chosen two systems for piloting, one is bill trading and the other is trade financing.

The former is because the counterparties know each other and are responsible for each other. There are not many tasks and responsibilities in the supervision. The latter is also because the frequency of handoffs is relatively low.

“The possibility of research in which applications is applied should also be based on reality. It is currently what can be put into trials, and at the same time, in the case of steady pilots, it is possible to observe the possibility of expanding applications in the future. The development of technology is forward-looking. It is necessary to estimate its future possibilities. Some things can't be done now, maybe in the future," Zhou Xiaochuan said.

Talking about Libra

The public will doubt the stability of Libra

Zhou Xiaochuan, the bank's former president, said at the meeting that Libra hosting is still in doubt, such as how the reserve amount is determined, whether the private Libra committee lacks publicity, and whether there is incentive to earn interest. Therefore, Zhou Xiaochuan called for global central banks to have a general cooperation mechanism in order to enhance confidence in the construction of global financial infrastructure.

When Zhou Xiaochuan mentioned Libra, he said that the application direction that was first emphasized was cross-border remittance. "I personally think this direction of choice is also justified." He explained that due to technologies such as blockchain and distributed accounting techniques, the number of transactions processed per second is relatively low, so if digital money is applied to the retail sector, it is temporarily impossible. Cross-border remittances are relatively small, so they can be used as an option. In addition, the efficiency of cross-border remittances is indeed problematic, and many people are not satisfied, so starting from cross-border remittances is indeed attractive.

However, Zhou Xiaochuan also stressed that since Libra exists in the form of stable currency, it must correspond to a basket of currencies. If the Libra Association manages a basket of currencies, it will cause private organizations to wholeheartedly debate and question public services.

“People will inevitably wonder if a private libra association will have a strong motive for profit, so they will take the money from the reserve to do other things, such as making loans or doing other things in the financial market. In this case, the public There is doubt about stability," Zhou Xiaochuan said.

Talking about third party payment

Many third-party payment agencies look at the advance payment

Zhou Xiaochuan is frank, he is more concerned about how the quantity of Libra-managed reserves is determined and how good the quality is. “That is to say, the money that is managed is really used as a reserve, and there is no motive for making profits. Because we found a lot Third-party payment agencies say they want to pay, and provide better payment through technology. However, some payment agencies actually have interest income after they have paid attention to the advance payment, and they can also make other investments to obtain income. This view is also close."

Talking about the global market

Need to prepare for wind control

Zhou Xiaochuan said that different government officials, central bank officials, and academic circles have different views on the possibility of the next round of financial crisis. Some people are more optimistic, others are more pessimistic. Pessimistic people believe that the next round of crisis is indeed a high probability, because there are many unhealthy phenomena in the global market. Therefore, we really need to prepare for the next round of financial risk control.

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