A leading fintech expert from one of China’s top universities says that Facebook’s Libra stable coin poses a “threat” to China, and has unveiled a list of six proposals for increasing the overseas competitiveness of the country’s payments sector.
“China’s payments sector has obtained a leading position internationally over the past several years,” writes Yang Dong (杨东) in an essay for Jingji magazine.
Yang is currently the head of the Fintech Research Centre of the Renmin University National Academy of Development and Strategy (中国人民大学国家发展与战略研究院金融科技研究中心) and drafter of China’s e-commerce e-payment law.
“However this lead is confined to China itself, and China still lacks competitive capability on the battleground of cross-border payments, where the payment sectors of all countries are competing.
“Overseas consumers have the ingrained habit of using Visa for overseas consumption, Paypal for e-commerce, and SWIFT for cross-border remittances.”
Yang foresees intensifying competition in the international payments arena in future as a result of technological advances.
“In June of last year Facebook led the launch of the Libra digital currency project, and announced that in future ‘cross-border payments will be as simple as sending an email.’
“This has launched a new generation of global payments competition.”
In order to research means of developing cross-border payments operations and raising the international competitiveness of China’s payments industry, Yang recently led a team of researchers to visit a slew of international financial institutions, including the US Federal Reserve, Bank of China’s New York branch, the Bank of England, the Japanese central bank, the Reserve Bank of Australia and the Australian Securities and Investment Commission.
Yang’s team of researchers compiled the following observations when it comes to efforts to shore up the international competitiveness of China’s payment sectors:
- China faces major challenges when expanding abroad into the international payments market, while the entry of overseas payments companies into China will launch a new round of competition in the domestic sector.
- Competition in the global cross-border payments sector is extremely intense, and market-based competition will lead to a rash of payments innovations. The governments of all countries will adopt a regulatory attitude of encouraging innovation while remaining preoccupied with risk.
- The open banking revolution could expedite the emergence of an entirely new cross-border payments network.
- International stable coin project Libra will be ready for launch following a model change.
In order to raise the international competitiveness of China’s payments sector, particularly when it comes to cross-border payments, Yang and his team make the following six recommendations.
- Encourage domestic companies to “go large,” and provide support when it comes to cross-border settlement and export of standards.
- Uphold market-based guidance, regulation which focuses on risk, and do not interfere in institutional cross-border cooperation.
- Deal with the threat and challenge posed to China by private digital currencies such as Libra, and support domestic enterprises in using market-based methods to issue digital currencies applicable to cross-border services, as well as participate in next-generation cross-border payments competition.
- Explore the application of blockchain technology to raising the security and coordination of cross-border payments.
- Support digital economic platforms in competing for the global resources of legal data via competition in cross-border payments operations.
- Use a “joint ticketing” mechanism to expedite open data sharing and energise cross-border payments.