It isn’t hard for China to win the superlatives game in virtually any field overnight: with roughly a fifth of the entire human population within its borders, China has huge crowds available to immediately skyrocket any measure of human behavior, especially when it comes to the economy. China is the largest global carbon emitter, as well as the largest investor in green energies; contains the most billionaires of any country, as well as the most diabetics.
The tricky thing, though, is that when it comes to winning consumer loyalty, Chinese brands historically achieve similar mass-movements by offering up their own domestic version of everything competing in the greater global marketplace. So in absolute numbers, Baidu tops Google in internet searches, Alibaba beats out Ebay in ecommerce sales, and Union Pay manages to distribute more credit cards than Visa–all in absolute global numbers, yet also almost exclusively in China.
Much like the Mandarin language, few people outside of the mainland have added to the number of users for these tools. China may be able to manage competition inside its borders to give domestic brands a leg-up on foreign alternatives, but that degree of influence disappears on the international stage. This is precisely what makes China’s interest–and swelling investment–in blockchain technology so compelling.
China’s Case for Blockchain
China’s approach to brand, product, and currency development holds China’s international influence back, well below its purchasing power, because the renminbi simply isn’t as fluid or flexible compared to other currencies. Much of that comes down to opacity in China’s central government, and the fact that despite its technological evolution, the country still runs a largely cash economy. Not only do Chinese citizens need a viable platform for taking their currency digital, they need that platform to integrate easily and painlessly with the greater global economy.
Chinese investors and leadership have paid rapt attention to the life cycle of Bitcoin, and have learned just how lucrative digital currency could be–with the right parameters governing its distribution and adoption. Blockchain has the potential to clear all these hurdles, and do so in a way that could make China not just able to fully punch its weight in the global economy, but effectively the world leader in blockchain finance.
The point is not, as so many Bitcoin enthusiasts have exclaimed, to replace currency itself, but rather to re-imagine and restructure the means by which currency and commerce flow: person to person, nation to nation, around the world. Blockchain provides the transparency and trust that has thus far hampered the Beijing government’s efforts to have Chinese currency flow as freely as dollars or Euros.
Big Brother is Still Watching
China’s political baggage weighs heavily on fiscal policy; central control has been assured for so long, that getting on board with something anchored in blockchain can seem like a significant change in strategy–but for China, it actually makes perfect sense.
The flip side of the inherent transparency of blockchain’s distributed, decentralized ledger technology is that it is visible to anyone and everyone–including the Chinese government. Giving up the sort of centralized, hands-on control that comes with centrally-managed banks carries the upshot of enabling the government to instantly monitor and follow the free flow of digital currency in real time.
Again, the blockchain doesn’t have to replace currency wholesale, it just provides new mechanisms for people and businesses to move money. Beijing can keep control over the markets, the banks, and even the official foreign exchange rates as much as it would like, but with the added precision that comes from having, for the first time, a truly instantaneous glimpse into the movement of its currency around the world. It could save money and overhead–if they can get it to work.
Jumping the Card
Union Pay may have more than its fair share of cards distributed among the Chinese populace, but usage rates are still relatively low. Part of the hubbub over Bitcoin was that it decentralized currency from banks or any other intermediaries. Credit cards, for all their perks, are still the provenance of intermediaries. So while the US explores a cashless future on the basis of plastic cards and mobile pay stations, China may be charting a course directly into a blockchain-based mobile pay economy.
With growth in digital sectors comes a trove of detailed, personal information. The greatest need for cyber security is in the finance and retail sectors because they cumulatively carry the most information: where money is, how it is moving, where it is going, etc. The same features that make blockchain attractive to a government like China also help bolster the entire system against theft and fraud. Bypassing an era of credit card dominance would save untold billions in fraud and waste.
Security solutions among the leading credit card companies tend to evolve slower than cybercriminals innovate, but even worse is that however the technology changes, it remains centralized in the hands of the credit companies. Blockchain not only offers more robust security solutions, it decentralizes them to eliminate the vulnerability of having the data stored in one place. For a primarily cash economy, going straight to blockchain likely looks like a better option than credit cards.
Remember that, with a push in the right direction, China can become the number one market for any brand or service virtually overnight. With all of the money going into blockchain products currently, it is reasonable to expect the nation of billions could take its own deployed system live and make blockchain an economic reality as well. Only unlike China’s other domestic brands, one of the fundamental drivers of blockchain adoption would be greater global economic integration and participation.