China intends to be the first country to launch an official digital currency. Last weekend, China’s Central Bank launched a pilot program that introduced the digital currency across four cities, and companies like McDonald’s and Starbucks are reportedly trying it out. The new digital currency is intended to replace some of China’s circulating cash supply. But what is the larger motivation behind China’s ambitious plan?
An article in the Securities Times by Zou Pingzuo, a researcher at the People’s Bank of China’s Research Bureau, provides some context on how some in the Chinese government are thinking. This article certainly lends some credence to the theory that China’s blockchain project is aimed at reducing the global influence of the United States and the US dollar.
LongHash has translated select excerpts from the article below to provide a window into how China’s Central Bank may be thinking about this project.
What is the future direction of China's central bank and monetary policies? The first step is to take full employment as the most important goal of monetary policies. To achieve this goal, the government must vigorously promote the development of the private economy and small and medium-sized companies, providing the most beneficial business and monetary environment for them compared with other countries.
The second step is to gradually establish a dynamic, precise and macro-micro synergistic market mechanism to realize the value creation function of a currency, in order to catch China’s per capita value up with that of the United States.
The third step is to introduce an innovative digital currency system based on human value, gradually realizing the goal of maximizing human value as well as establishing a modern and scientific currency governance system.
To create an innovative monetary system and vigorously develop a human value-based digital currency will make a significant contribution to China and to the entire human species, both theoretically and practically.
Both the monetarist school and the Keynesian school failed to realize that “money can create value,” while this process of creation can be divided into two paths: internal and external creation.
A monetary system based on the scientific study of people's value can create more value, both economically and socially, while the transmission mechanism for monetary policy is a market process of value creation. For now, the digital currencies launched by different countries do not have this function. This is mainly because of a lack of correct and profound understanding of the law of value, currency and economic growth.
The industry of human value management may be the most profitable industry in the future. In particular, under the backdrop of the industrialization, marketization, and internationalization of RMB, China will see the appearance of a “value industry” based on blockchain technology in the next five to ten years. This industry is the result of the change in value function triggered by the technology revolution. Meanwhile, through the digital and token economy, it will lead China to the third wave of civilization – a scientific society – and inspire profound social transformations that are likely to become a global standard.
This kind of transmission mechanism for the monetary system comes with the following key points:
1) Use blockchain-based super accounts to define the value of each person and generate big data about each one’s value. This kind of big data serves as a mutual confirmation with big data about each other's income function and expenditure function and generates everyone's token through the market. The token of human value is a digital currency.
2) The expansion of blockchain’s consensus mechanism to the market forms the process of transactions. Everyone can sell his or her own right to use time (simplified as “time right”), which is also a kind of blockchain-based token with personal and time stamps.
3) An innovative digital currency combining the idea of “blockchain + human value” makes the currency a tool to discover, manage, create and implement value, integrate the measure of value function of a currency with the currency, and enhance the value creation function of a currency, thus fundamentally eliminating inflation and deflation.
4) Implement strict and scientific access and regulation systems to prevent and resolve any potential risk or crisis.
This kind of currency system denies the transmission mechanism for the current U.S. dollar-centered credit-currency system, thus saving the whole world from a U.S. dollar hegemony and a "bloodsucking situation." The global expansion of China-based large tech companies will not only have a key impact on the rise of the country but also make a great contribution to the human species as a whole.
The new transmission mechanism is highly compatible and interconvertible with China’s current monetary, economic and social system, and is feasible both theoretically and practically. More important, the maximization of human value is actually the realization of people’s wealth freedom, spiritual freedom, and life freedom, as well as the harmonious development between mankind and between people and nature. It is a system of universal value that can resolve the ideological conflicts between China and Western countries.
The year 2020 is destined to be an extraordinary year and a significant tipping point in human history. The ongoing outbreak of COVID-19 globally has left us many reflections. The most important one is the reflection upon values. We must recognize that reform and opening-up are needed for the theory, system, market, and society of both China and the whole world. We are looking forward to new theories, innovative monetary and economic systems, to a new state governance system and social system, to a harmonious, healthy and safe global value and a community with a shared future.
We are looking forward to a world with no more virus, no more economic or monetary plunder, no more “bloodsucking hegemony,” and no more economic sanction or trade barrier. We are looking forward to a brand new world.