Asia Times: Belt & Road Phase 2 moves beyond infrastructure – Interview with Professor David Arase of The University of Hong Kong and the Hopkins-Nanjing Center By SCOTT FOSTER DEC 26, 2021

The $60 billion China-Pakistan Economic Corridor is a major part of China’s Belt and Road Initiative.

Keep an eye on China’s Belt & Road Initiative in the new year. There is more going on than is generally realized.

Belt & Road is not only the construction of land and sea transport “corridors” across and around Asia to Africa, Europe and beyond to facilitate trade; not just Chinese-built ports and harbors along the coasts of Asia, Africa and Latin America that might be turned into naval bases; not just “debt-trap diplomacy” aimed at roping developing nations into an emerging Chinese international order.

David Arase, honorary professor at the Asia Global Institute at The University of Hong Kong and resident professor of international politics at the Hopkins-Nanjing Center of the Johns Hopkins University School of Advanced International Studies, addresses these points in great detail.

More than enough detail to disabuse us of the notion that – its methods and purposes having been called out by vociferous American diplomacy – Belt & Road is on the back foot.

In a published essay, Arase writes that the Chinese have been aware of the shortcomings of the original physical infrastructure-focused Belt & Road Initiative (BRI) – including credit, environmental and reputational risk – for some time and are dealing with them in a comprehensive, forward-looking manner:

By the second Belt and Road Forum (BRF) in 2019, China had reacted to the negative risk-reward prospects of the initial cooperation phase by announcing a new “green and sustainable” era for the Belt and Road …

Less noticed but perhaps more significant was a new focus on harmonizing disparate legal, policy and technical standards regimes among connected BRI countries. In his speech at the 2019 BRF, [Chinese President] Xi emphasized that “we need to promote trade and investment liberalization and facilitation, say no to protectionism and make economic globalization more open, inclusive, balanced and beneficial to all.” In concrete terms, this meant promoting uniform standards for free trade zones, intellectual property protection, technology transfer rules, tariff reduction, exchange-rate stabilization, trade treaty enforcement and trade and investment dispute resolution ….

While heavy infrastructure project cooperation would still be needed to upgrade corridor connectivity, BRI cooperation has expanded into technology – knowledge-intensive digital backbone technologies (the “digital silk road”), health-related industries (the “health silk road”) and complex 5G-based internet-of-things (IoT) projects such as smart cities (“innovation cooperation”).

With this as background – and unable to meet due to the virus – I interviewed the professor from Tokyo by email. Here’s Part 1 of the two-part edited interview:

Q: You’ve talked before about China’s Belt & Road being not just a matter of promoting trade through infrastructure, but a comprehensive geostrategy with a military component. Could you elaborate?

Belt & Road infrastructure projects create a bridgehead for Chinese commerce, investment, finance, technology and logistics to enter much smaller developing country economies and to modernize and dominate sectors where they can profitably operate.

If the modernized economy of a country reaches a point where it cannot be maintained without Chinese firms and access to Chinese finance, trade and technology, governments put in this situation would be satisfied, bribed or compelled to follow Chinese requests and preferences to ensure their own interest in economic and political stability.

They could even be persuaded to request cooperation with the People’s Liberation Army and Chinese civilian security ministries to protect and defend their joint investments in infrastructure and Belt & Road connectivity with China.

If this kind of situation becomes widespread across the Belt & Road footprint, with their future economic and political prospects at stake, governments across Eurasia will have no choice but to cooperate with China’s economic, political and security governance agendas even if these undermine and replace those of the United States and its allies.

BRI advances this kind of geo-economic strategy by providing “hardware,” or physical plant, equipment, transportation, power and digital infrastructure financed by state-owned banks and built and operated by Chinese state-owned enterprises.

These party-state flagship entities bring a whole ecosystem of Chinese exporters, subcontractors, labor service providers, private enterprises and petty entrepreneurs everywhere Belt & Road projects are built.

Q: But doesn’t this process create more and more overseas assets that China needs to protect?

Exactly. When a state accumulates overseas vested interests it must arrange for their protection. The rules-based [international] order has established multilaterally agreed and legally binding norms that govern the acquisition and protection of overseas interests.

But for the system to work in the absence of a world government, all contracting parties have to respect the norms they have pledged to uphold.

Under the current order, there are two different reasons to develop armed capabilities and recruit allies to defend your overseas interests. One is to defend your lawful rights under the rules-based order. The other is to forcefully claim new rights and impose new governance norms to enhance your own interests at the expense of existing norms and rights of other actors.

The accumulation of overseas interests is what the Belt & Road Initiative does in a big way across and around Eurasia. As China builds ports, plantations, mines, railways, industrial parks and trade zones, new markets, new transportation routes and communities of overseas citizens, it cannot be faulted for seeking ways to protect them.

Q: Meaning that what started as economic outreach is now linked to China’s national defense?

On the contrary, it has been from the beginning.

The Belt & Road Initiative was launched in autumn 2013 together with complementary diplomatic, political and institutional initiatives to build a new kind of China-centered international order. These partner initiatives included “periphery diplomacy,” building a “community of common destiny” and the Asian Infrastructure Investment Bank.

Belt & Road infrastructure must be built in accordance with China’s formal legal and policy mandates that implement military-civilian integration or fusion. The 2010 National Defense Mobilization Law mandates that civilian infrastructure projects “which are closely related to national defense shall meet the national defense requirements and possess national defense functions,” and must be surrendered for military use when needed.

The 13th Five Year Plan (2017-21) calls for integrated civilian-military development projects in overseas maritime regions. The 2015 defense white paper calls for infrastructure development that accommodates both civilian and military use that is “compatible, complementary, and mutually accessible.”

And the 2017 National Transportation Law requires “planning, construction, management and use of resources in transportation fields such as railways, roads, waterways, aviation, pipelines and ports for the purpose of satisfying the national defense requirements.”

Chinese state-owned enterprises designing and building BRI infrastructure must act in accordance with these laws.

Q: And this, I presume, leads inevitably to the expansion of Chinese security-related activities overseas?

Yes. China acknowledges no formal connection between Belt & Road and the People’s Liberation Army. But in fact, the extension of overseas investment interests via Belt & Road requires that the overseas protection roles and missions of the army keep pace.

According to the army’s strategic planners, “where national interests expand the support of the military force must follow.” Thus, China’s geopolitical influence advances with the Belt & Road Initiative in the vanguard and with the People’s Liberation Army bringing up the rear to secure Belt & Road investments and trade routes from potential threats.

In performing its Belt & Road overseas protection missions, the People’s Liberation Army should find Belt & Road partner governments willing to accept military education, training and equipment that enhances their own national security as well as the security of Chinese investments.

The People’s Liberation Army should also find Belt & Road port and transportation infrastructure accessible, familiar and easy to operate in emergencies if necessary.

With the start of the Belt & Road Initiative from 2013, it is not accidental that the 2015 anti-terrorism law authorized the People’s Armed Police to perform overseas counter-terror missions and that the 2015 defense white paper added safeguarding the security of China’s overseas interests and maintaining regional and world peace to the strategic missions of the People’s Liberation Army.

The 2019 defense white paper describes “overseas interests” as improved overseas military operations and support, overseas logistical facilities, vessel protection operations, strategic sea lane security and overseas evacuation and maritime rights protection operations.

In 2020, the National Defense Law was revised to add “safeguarding China’s overseas interests” and authorized the People’s Liberation Army to “mobilize its forces” to “defend its national interests and development interests, and resolve differences with the use of force” as additions to the “missions and tasks” of the army.

Belt & Road assets and follow-on commercial investment and trade interests obviously constitute overseas development interests, so now the People’s Liberation Army, aided by Chinese diplomacy, must develop cooperation and capabilities to defend these interests if ordered to do so by the Chinese Communist Party.

It is not as if the Chinese military has been caught unprepared. The Chinese navy will complete a third (and new-model) aircraft carrier by summer 2021 and has started building a fourth. It also has developed a counter-terrorism force capable of overseas deployment, an expeditionary marine corps and a paratrooper corps with large new types of maritime and air troop transport vessels to deploy these forces.

With only one officially acknowledged overseas base in Djibouti, overseas protection of Belt & Road development interests will require the negotiation of agreements with host countries to transition ports, airports and development zones that heretofore have been exclusively civilian into dual or parallel use facilities available to support an enhanced level of People’s Liberation Army strategic presence to secure jointly vested Chinese and Belt & Road partner country development interests.

Q: How does this change the calculus of Belt & Road geostrategy?

Besides securing support for People’s Liberation Army operations, dividends include agenda-setting in regional governance forums; the capture of markets and critical resource supplies; Belt & Road partner cooperation with party-state military and police agencies to secure interests and grow influence with partners; and political influence via education and training of politicians, government officials, soldiers and policemen and youth in partner countries. For a party-state dedicated to the Chinese Dream agenda, such political and strategic gains may far outweigh the financial cost of Belt & Road project loan write-offs.

Next: Beyond Eurasia

Scott Foster, a graduate of the Johns Hopkins University School of Advanced International Studies in Washington, DC, is an analyst with LightStream Research in Tokyo. Follow him on Twitter: @ScottFo83517667

Video: Despite fake news propaganda by western medias, Christmas is not cancelled in 🇨🇳 China. 儘管西方媒體假新聞宣傳來妖魔化中國, 但🇨🇳中國並沒有取消聖誕節.
https://vimeo.com/660664221
https://youtu.be/UErfKoVEAzQ
https://www.facebook.com/100036400039778/posts/629247981631864/?d=n

Biden above face on diplomatic boycott. Like the Chinese saying: “when you fell down, in order to save face, you said I fell to pick up sands 拜登在外交抵制問題上退宿 ”就像中國人說的：“摔倒了但為了面子，你說我摔倒是為了撿沙子”

https://www.scmp.com/news/china/diplomacy/article/3161250/bidens-diplomatic-boycott-stands-despite-asking-send-18

The US will send officials to China to provide “consular and diplomatic security services” for American athletes, according to the US State Department

If they could do it to Hawaii, imagine what they could have done to the 800 US military bases around the world! 如果他們能對夏威夷做這件事，想像一下他們會對全世界 800 個美國軍事基地做些什麼！

Hawaii Hearing Officer Calls For Closing Red Hill Fuel Facility To Avert ‘Imminent Threat’ – Calling the Navy’s water contamination crisis a “humanitarian and environmental disaster” that puts the public in imminent peril, a Hawaii health department hearing officer on Monday recommended upholding the state’s emergency order to drain the Red Hill fuel tanks.

“The weight of the evidence establishes that the Red Hill Facility, as currently situated, is a metaphorical ticking timebomb located 100 feet above the most important aquifer on Hawaii’s most populous island,” DOH Hearings Officer David Day wrote in a proposed decision and order released on Monday.

Video: Chinese diplomats are merely dancing with wolves – why no U.S. media reporting fire side chats? 美國加州舊金山星島日報時事觀察 余非 秦剛大使駐美後的「爐邊談話」——四個點評；戰狼外交？抑或與狼共舞？

https://vimeo.com/660568496
https://youtu.be/rPZz2xU-qB4
https://www.facebook.com/100036400039778/posts/629042294985766/?d=n

星期一　美國《星島中文電台》「時事觀察」節目。
美國時間：2021年12月27日
余非：秦剛大使駐美後的「爐邊談話」——四個點評；戰狼外交？抑或與狼共舞？

本集談中國新任駐美大使秦剛。12月20日，秦剛大使接受美國多家主流媒體主編和記者的聯合採訪。採訪以美國傳統的「爐邊談話」（Fireside Chats）方式用英文進行。奇怪的是，談話前雙方商定，全部內容都是公開、可以報導的；也可以截取部份要點、吹吹風。可是，如此重要的對談記者會，對談後第二日、第三日不見有美國媒體報導。於是12月24日，中國駐美國大使館的網頁上載了中英文全文。我錄節目的12月26日，美國媒體仍未刊登全文（節目播出時是否已有全文報導，大家可留意）。本集節目以中國駐美國使館網頁的翻譯版本為原材料，跟大家分享讀後感。我按原文次序，做四個點評。中英文全文連結會附於文末。有興趣可一讀，大概七千多字。

第一個點評。秦剛來了美國大約五個月，有記者想知道他的看法。那記者很懂得提問，原句是：「就任中國駐美大使這幾個月來，有甚麼讓你感到意外嗎？」秦剛說（大意）：他來到美國將近五個月了，還談不上研究，但感受是，美國是個很複雜的國家，許多事情令人費解。所以，更深入、更全面瞭解美國需要時間。同時，美國政界幾乎人人都談論中國。但是這些為數不少的人，既不懂中國、不懂中文，也不瞭解中國的歷史文化和人民，不過他們都是美國的「中國問題專家」。
我的點評是：反映秦剛從複雜處去看美國，所以去了五個月，仍然坦白表示未看通看透。相比之下，美國反而有很多「不懂中國」的中國問題專家，反映他們將複雜的中國簡單化。在懂與不懂的對比之下，秦剛的回應更加真實和有深度，比美國的中國專家更勝一籌。

第二個點評。我們知道在政治層面，美國政治精英和deep state長期視中國崛起為威脅；可是，原來美國民間是另一回事。秦剛在回答上述問題時還包括以下內容。大意是：秦剛深切感到美國人民有善意、熱情、隨和。美國普通人關心的事很日常，跟中國老百姓一樣，譬如都關心就業、教育、物價等等。秦剛想點出，美國政界將焦點集中在中國身上，而美國普通市民關心的是最日常的生活。秦剛說，每天都收到普通美國民眾的來信，問中國的事，他們對中國很感興趣，充滿好奇。秦剛說（原文 ）：「我不禁自問，究竟哪一面更代表美國？這就像硬幣的兩面，對此我還要深入觀察。」

我的點評是：大家如果有聽我的節目，在題為「一將功成萬骨枯」那一集，以及上星期分析台灣不出來投票的中間選民那一集，我都點出，一個社會，在人為味道很重的政治氛圍之外，還有沒被留意的普通人和普通人的生活。我一直認為，由輿論場製造出來的民意，有放大了、不真實的一面。簡言之，我認為政治和民間是兩個層面；兩個層面有時分開、有時重疊。不管是分開還是重疊，總之，它們是兩回事。舉例，我認為中國外交上的據理力爭，是有功能作用和針對性的；它不是一種情緒發洩，是謀定而後動的國家策略。對應於這種國家層面的策略，作為普通人，不需要緊隨，不必用相同的取態去閱讀時事和關心世界。作為民間的普通人，最好多一點正向的思想和情緒，多談建設，這樣反而是社會之福。
讀秦剛的答記者問，我很開心，想不到秦剛也留意到：政治層面和最大多數的普通人民層面，可以是兩回事。秦剛的回答和觀察果然有深度，不是泛泛之談。

第三個點評是有記者問「戰狼外交」。有記者問：在中國「戰狼外交」越來越多是因為中方認為自己被當成小孩遭到訓斥了嗎？

秦剛一開腔的回答太漂亮了！照錄原文。秦剛說：「中國人民熱愛和平、推崇和諧。中國從不挑釁，也不製造麻煩。中國堅持走和平發展道路。」
我的點評是：人家問你「戰狼外交」，秦剛用中國人民熱愛和平、愛和諧來作一開腔的第一、二句，格調實在太高了。秦剛的高度，值得所有將事情推向極端的打手，以及不是打手，卻錯誤理解怎樣做才是為中國好的人細心聽一下。最近網上炒作北京王府井拆聖誕裝置。我上網一查，轉傳得最熱心的是反華網頁。心想，有個別裝置因為某些原因要拆除，有可能的，不足為奇；可是，一定不是大面積的統一行動。上網查看了北京市聖誕節活動概覽，根本沒有被禁（會附連結給大家）。情況就如中國人有信仰自由；以基督教為例，被禁的只是組織可疑的地下教會和教派。
秦剛對戰狼問題的回應尚有以下更精彩的幾句，原文節錄如下：「當前，中國面臨更加複雜和嚴峻的國際環境，有的國家對中國動輒頤指氣使、攻訐誹謗。中國外交官面對干涉中國內政、損害中國利益的不友善言行，必須站起來說不，講清事實，辯清道理，普通中國公民都應如此，更別說中國外交官了。我們不是主動出擊，而是做出回擊。更準確地說，中國外交官不是戰狼，而是與狼共舞。」聽眾朋友，秦剛的智慧和語言藝術超好。「戰狼外交」和「與狼共舞」同樣提到狼，但是誰才是狼，一下就翻轉。戰狼外交是將中國說成是狼，而與狼共舞，是對方才是狼。秦剛真是高手。

最後是第四個點評。有記者問，中俄聯手是不是集團政治？會不會導致世界分崩離析？
聽眾朋友，我想這提問很多人也懂得回答。跟中國人說「集團政治」？！夠美國多嗎？！又五眼、又北約！且看秦剛大使如何回答。以下是開首幾句，照錄：「中俄邊界線長達數千公里，這是兩國和平共處、友好相處的最根本原因。我們不想與美國打仗，也不想與俄羅斯打仗。」
我的點評是，秦剛再一次回答得很高手。人家用抽象框架去提問（「集團政治」），秦剛用地理事實、沒得反駁的現實層面去具體回答；將記者抽象的政治概念拉回地面。一切實實在在，不是彷彿很隱閉的拉幫結派。
未完的，秦剛還有以下回答，照錄：「兩國都面臨一些不公正的態度和行為。……所以兩國有很多共同點，但兩國都明確表示不結盟。倒是美國在與別國結盟，」
我的點評是，秦剛這回答令我赫然明白為何中俄不結盟。因為不結盟，令部份評論、包括不反華的評論都以貌合神離之類的方向解讀中俄合作。秦剛的回答點醒了我們，不做簽約式的結盟，是避免目標太大及落人口實。事實上彼此合作無間，比落為文件的結盟更符合現實需要。例如，方便在國際舞台上進可攻、退可守。進可攻也者，是事事互相支持和有默契地配合；退可守也者，是不落文字，中俄都可以和對方的敵人有權宜合作，雙方的國際空間可以更有彈性。反而美國搞反華結盟，處處明刀明鎗，少了彈性。中國只做不說，空間更大。

本集節目用秦剛一段說話作結：「如果真有人對中國發動冷戰，中國不會是輸家。那些人也不可能贏得冷戰。首先，中國不是前蘇聯，中國共產黨也不是僵化的蘇聯共產黨。中國共產黨是成熟的大黨，剛剛慶祝了百年華誕，過了很精彩的生日。同時它也是風華正茂，銳意創新、與時俱進，不斷為人民創造更好的生活，也將繼續為世界帶來和平、繁榮和機遇。第二，中國善於從失敗中學習，從前蘇聯的解體中汲取教訓。中國一直在研究和討論前蘇聯為何解體。最後也是最重要的一點，中國共產黨贏得了14億人民的衷心擁護。」

秦刚大使接受多家美主流媒体联合采访
（中文全文）
http://www.china-embassy.org/dshd/202112/t20211224_10475267.htm
(English)
http://www.china-embassy.org/eng/dshd/202112/t20211225_10475739.htm

Times: The U.S. Is Losing the Global Race to Decide the Future of Money—and It Could Doom the Almighty Dollar BY DION RABOUIN SEPT 21, 2021

https://time.com/6099105/us-china-digital-currency-central-bank/

https://time.com/6099105/us-china-digital-currency-central-bank/

In cities across China, the country’s central bank has begun rolling out the e-renminbi—an all-digital version of its paper currency that can be accessed and accepted by merchants and consumers without an internet connection, credit or even a bank account.

Already having conducted more than $5 billion in e-renminbi transactions, China has opened its digital currency up to foreigners. Next year, when Beijing hosts the Winter Olympic Games, authorities are expecting to let the world test drive its technological achievement.

The U.S., by contrast, is having trouble even concluding its multi-year exploration into the possibility of an e-dollar. In fact, an upcoming Federal Reserve paper on a potential U.S. digital currency won’t take a position on whether the central bank of the United States will, or even should, create one.

Instead, Federal Reserve Chair Jerome Powell said in recent testimony to Congress, this paper will “begin a major public consultation on central bank digital currencies…” (Once planned for July, the paper’s release has since been moved to September.)

Once the world leader in digital payments and technological innovation, the U.S. is being outpaced by its top global adversary as well as much of the industrialized and the developing world.

The Bahamas recently announced the integration of its digital Sand Dollar into a stock exchange, while Australia, Malaysia, Singapore and South Africa are moving forward with the world’s first cross-border central bank digital currency exchange program led by the Bank for International Settlements (BIS), which is known as the central bank of central banks.

Such developments have been somewhat outshined by El Salvador’s recent decision to make bitcoin a legally accepted currency, which few expect to make significant impact in the payment space. But outside of the cryptocurrency space, nations around the globe are making significant strides in the development of the digital future of money — supported by governments and backed by powerful central banks.

Leadership in this space will have implications for more than just payments: geopolitical ambitions, economic growth, financial inclusion and the very nature of money could all be dictated by who leads the charge and how.

“I don’t think the U.S. is aware there is a race”

Digital currencies are the next wave in the “evolution of the nature of money in the digital economy,” Hyun Song Shin, economic adviser and co-leader of the Monetary and Economic Department at the Bank for International Settlements, tells TIME.

As more of our world migrates from physical brick-and-mortar to wireless and cloud-based, the way we pay for things is changing as well. A central bank digital currency would operate just like cash, but instead of having to carry it in a physical wallet or put it into a bank account, it would be stored and accessed digitally. Not only could U.S.-backed digital currency facilitate easier, modern banking, it could prove vital in protecting American international influence.

Late to the party, the U.S. is “stepping up its research and public engagement” on digital currencies, the Federal Reserve says, including forming working groups on cryptocurrency and other kinds of digital money, and experimenting with technology that would be central to producing a digital dollar. The Fed’s regional Boston branch is overseeing these efforts with the Massachusetts Institute of Technology on what’s known as Project Hamilton.

But the path towards a digital U.S. dollar has met many challenges, skeptics and outright opponents. All while China, and other countries, push forward.

Lagging behind the world

Just how far behind is the U.S. in the development of a central bank-issued digital currency (CBDC)? According to global accounting firm PwC’s inaugural CBDC global index, which tracks various CBDCs’ project status from research to development and production, the U.S. ranks 18th in the world. America’s potential efforts trail countries like Sweden, South Korea and China but also countries like the Bahamas, Ecuador, Eastern Caribbean and Turkey.

China, with its government’s hyperfocus on maintaining control and overseeing data, has been working to develop a CBDC for almost a decade.

And the U.S. is probably not close to catching up. Analysts like Harvard economics professor Kenneth Rogoff, who study monetary policy and digital currencies, estimate that the U.S. could be at least a decade away from issuing a digital dollar backed by the Fed. In that time, Rogoff argued in an op-ed earlier this year, the modernization of China’s financial markets and reduction or removal of its currency controls “could deal the dollar’s status a painful blow.”

China has already largely moved away from coin and paper currency; Chinese consumers have racked up more than $41 trillion in mobile transactions, according to a recent research paper from the Brookings Institution, with the lion’s share (92%) going through digital payment processors WeChat Pay and Alipay.

“The reason you could say the U.S. is behind in the digital currency race is I don’t think the U.S. is aware there is a race,” Yaya Fanusie, an Adjunct Senior Fellow at the Center for a New American Security, and a former CIA analyst, tells TIME in an interview. “A lot of policymakers are looking at it and concerned…but even with that I just don’t think there’s this sense of urgency because the risk from China is not an immediate threat.”

Not only is the U.S. running significantly behind in the development of a CBDC, we are trailing the rest of the world in digital payments broadly.

Kenya, for example, has almost fully digitized its economy through its digital currency and payment system MPESA, making transactions free and almost instantaneous. India’s Unified Payments Interface (UPI) allows users to transfer money instantly between bank accounts with no cost. Brazil’s PIX facilitates the transfer of money between people and companies in up to 10 seconds.

All of these programs work through and are overseen by the countries’ central banks rather than commercial banks or other private companies.

What’s holding the U.S. back?

Critics argue CBDCs are simply a solution in search of a problem and potentially harmful. Many see support from the banking sector as vital to the success of a digital U.S. dollar, however commercial banks in the U.S. have taken a largely adversarial stance.

“The proposed benefits of CBDCs to international competitiveness and financial inclusion are theoretical, difficult to measure and may be elusive,” the American Bankers Association said in a statement at a recent congressional hearing on digital currencies. “While the negative consequences for monetary policy, financial stability, financial intermediation, the payments system, and the customers and communities that banks serve could be severe.”

The Bank Policy Institute, which lobbies on behalf of the country’s largest banks, went so far as to argue that neither the Fed nor the U.S. Treasury even has the constitutional authority to issue a digital currency.

Commercial banks dominate the U.S. financial system to such a degree that unraveling them would be ostensibly impossible, experts say, they also would be a powerful adversary. Former Goldman Sachs managing director Nomi Prins notes banks have clearly seen the writing on the wall.

“Banks are centralized middlemen with respect to financial transactions,” Prins, author of Collusion: How Central Bankers Rigged The World, tells TIME. “The more popular cryptocurrency or digital currency becomes, the fewer profits the banking system can reap from traditional services and verification methods that allow them to hold, take or use their customers’ money, and the more financial power they stand to lose as a result.”

Even disruptive financial technologies like PayPal, Venmo and Zelle work through the banking system, rather than around it, thanks in large part to the banks’ power.

Central bankers also generally have concluded that commercial banks are a necessary piece of a potential CBDC ecosystem, thanks to their pre-existing regulatory guardrails and ability to move money.

Top policymakers at the Fed, including influential Vice Chair for Supervision Randal Quarles, have joined the banking industry in arguing that a digital dollar “could pose significant and concrete risks” and that the potential benefits “are unclear.”

Fed Governor Christopher Waller said in August he was “skeptical that a Federal Reserve CBDC would solve any major problem confronting the U.S. payment system,” in a recent speech he titled “CBDC: A Solution in Search of a Problem?”

Further, there’s no central U.S. authority with direct oversight or responsibility for any of this.

In addition to the Fed, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, Office of Thrift Supervision, Financial Stability Oversight Council, Federal Financial Institutions Examination Council and the Office of Financial Research would all have some stake in the development of a digital currency backed by the central bank, to say nothing of state and regional authorities.

“The U.S. has an active congressional debate, which is beneficial and very important,” Federal Reserve Governor Lael Brainard tells TIME in an interview. “But the U.S. also has a diffusion of regulatory responsibility with no single payments regulator at the federal level, which is not as helpful. That diffusion of responsibility is part of what creates the lags that our system is working through.”

None of this exists in China where the Chinese Communist Party oversees the central bank, commercial banks and their regulators and is unconcerned with privacy.

How a downgraded dollar could hamstring U.S. influence

An American CBDC could have lasting geopolitical impact and curb a longstanding international effort to reduce reliance on the mighty U.S. dollar.

“Why we should care about this is that the U.S. financial system is not intrinsically dominant,” Fanusie says. “Other countries, both allies and adversaries, are sincerely interested in finding ways to decrease their dependence on the dollar.”

With the U.S. dollar as the world’s reserve and primary funding currency, the U.S. can restrict access to funding from financial markets, limit countries’ ability to sell their natural resources and hinder or block individuals’ access to the banking sector.

“Other countries, both allies and adversaries, are sincerely interested in finding ways to decrease their dependence on the dollar”

While dollar dominance has rankled much of the world for decades, there has been no suitable replacement for the U.S., with its massive economy, sophisticated banking system and sprawling international presence.

China is in the midst of a long-term push to simultaneously grow its financial markets and internationalize its currency. Both have the end goal of allowing China and its allies to limit the ability of the U.S. to enforce its will through economic actions like sanctions.

Fanusie wrote in a January report that being the first major economy to roll out a digital currency is “part of China’s geopolitical ambitions.”

However, the renminbi will not become the world’s reserve currency — at least, not any time soon. But what China has done by being in the forefront of CBDC development is put itself in position to take the lead on development and implementation of rules and regulations for digital currencies on a global scale.

“While America led the global revolution in payments half a century ago with magnetic striped credit and debit cards, China is leading the new revolution in digital payments,” writes Brookings’ economic studies fellow Aaron Klein.

Why should central banks offer digital currencies?

Over the past decade, digital currencies, including cryptocurrency and “stablecoins,” have sprung up like weeds. Some purport to be just as safe as dollars, but are backed by questionable assets. In a crisis regulators worry they could fluctuate wildly in value or lose their value altogether.

Having central banks, which are responsible for the printing and circulation of coins and paper money, issue digital currencies is in part a reaction to this private sector activity, Shin says, “accelerated by the potential encroachment of private digital currencies, and the need to preserve the role of money as a public good.”

“The status quo is not an option”

Notably, a U.S. digital currency could provide benefits to everyday people. It could increase financial inclusion and fix flaws in current payments systems, Shin adds, citing findings of a recent BIS study.

For example, transferring money between U.S.-based bank accounts, even those held by the same person, can take days. The process can be even longer when crossing international borders. Credit and debit card transactions similarly don’t settle for days and come with significant fees for merchants, who sometimes pass them on to customers.

CBDCs could grant universal access to the banking sector and quickly facilitate the distribution of paychecks and government funds, reducing the need for costly bank workarounds like check cashing and payday loans.

Championing CBDCs

Brainard has been pushing the Fed to move on a digital currency for years, but there was little urgency from others at the Fed or in Congress. Companies developing their own currencies, consumers investing in cryptocurrency and the COVID-19 pandemic making paper notes anathema to many Americans changed that.

Before COVID-19, Facebook’s Libra project (now known as Diem) showed lawmakers and central bankers the potential for a private company to step in and fill the void by effectively minting its own currency that could be spent by users around the world.

“The status quo is not an option,” Diem co-creator David Marcus said at the International Monetary Fund’s 2019 fall meeting. “Whether it’s Libra or something else, the world is going to change in a profound way.”

Brainard, for one, has taken notice.

“My own thinking is that stablecoins and related private sector initiatives are moving very rapidly, which makes it incumbent on us to move more rapidly,” she tells TIME. “That is why I have been pushing to advance outreach, cross-border engagement, and policy and technology research for several years now.”

So-called stablecoins — unregulated digital currencies created by private companies that purport to represent dollars but are completely unregulated — have become a significant worry for lawmakers and shown the importance of considering tying currency to a central bank.

“It’s getting harder and harder for community banks to compete for new customers when big tech companies can afford to spend billions on marketing and technology,” Sen. Sherrod Brown, who chairs the Senate Banking Committee, tells TIME. “But many of these new ‘fintech’ products don’t come with the consumer protections, federal backing or customer service and relationships with the community that small banks and credit unions provide.”

During a hearing on digital currencies in June, Sen. Elizabeth Warren, the ranking member of the Subcommittee on Financial Institutions and Consumer Protection, compared stablecoins to worthless “wildcat notes” that were issued by speculators in the 19th century.

Her expert at that hearing, Lev Menand, an Academic Fellow and Lecturer in Law at Columbia Law School, went further in his testimony, calling stablecoins “dangerous to both their users and … to the broader financial system.”

With private companies pushing deeper into the digital currency space, rival countries seeking to seize leadership and a public that is moving further away from physical currency, the U.S. is facing a world in which it may not control or even lead the world’s payment systems.

That would make the future of money look very different from the past.

Video China: “Time of Xi” documentary – how President Xi Jinping manage China and substantially improving Chinese lives. 最近，美国探索频道的纪录片《习近平治国方略：中国这五年》（China：Time of Xi），又火了！

Episode #1 https://youtu.be/kx6kFgCK1nk
Episode #2 https://youtu.be/poyUybn4iYM
Episode #3 https://youtu.be/OmkGtD7HpdE

美國 vs 中國：
資本主義 vs 民本主義
霸權主義 vs 大同世界
個人主義 vs 群體意識
白人至上 vs 五族共和

Discovery Channel’s “Time of Xi” to see China in the past 5 years from the eyes of Americans and Westerners.

3×45 minutes in-depth, eye-opening, impartial review of where China has been and where it is going.

https://mp.weixin.qq.com/s/40LTItrLPMZK-4v5Mo2pgw?from=timeline&isappinstalled=0&scene=2&clicktime=1640605213&enterid=1640605213

770 billions for US military, the killing machines, but ‘No federal solution’ for pandemic, Biden concedes. No longer vowing to ‘shut down’ Covid-19, the president says states will need to solve the crisis on their own (money over Americans’ lives) 拜登承認，7700 億美元用於美國軍隊，即殺人機器比救美國人重要, 但“沒有聯邦解決方案”可以幫助美國各州應對大流行病。 總統不再發誓要“關閉”Covid-19，他說各州將需要自己解決危機（金錢對美國人的生命重要).

https://www.rt.com/news/544549-biden-tells-states-solve-covid/

Professor John V Walsh, MD in San Francisco: In Wuhan and elsewhere all the China national resources were poured in to help the provinces. 舊金山醫學博士 John V Walsh 教授：在武漢和其他地方，中國所有的資源都傾注於幫助各省.

Here the states are now on their own! Same day as Biden signs a $770 billion military budget. 在這裡，美國各州祇可以自生自滅了. 但同一天，拜登簽署了 7700 億美元的軍事預算。

Biden says he has the backs of the states – leading from behind once again. 拜登說他支持各州 – 再次是廢話連篇.

Professor John V Walsh, MD, in San Francisco: This is what happens when the fundamental value of a society is to put human life first (China) and not the economy (USA). (From the very conservative Financial Times) 當一個社會的基本價值是將人的生命放在首位 (中國) 而不是經濟 (美國)時，就會發生這種情況

Re: Trevor Noah’s slander on China refuted by US scholars at Johns Hopkins and even at CISS(!!!)

I guess it was monstrous to bring 800 million people out of poverty, get rid of absolute poverty, contain the pandemic with only 5000 deaths (still none in 2021), provide an alternative to the exploitation of the US Empire for the Global South, change the status of women overnight at the time of liberation and bring 20% of humanity out of poverty and humiliation into the 20th Century.

Now China finds itself encircled by US bases and warships, the target of sanctions and propaganda of the type that has been used to launch wars and on Korea, Vietnam, Iraq, Afghanistan, Libya, Syria and so many more covert wars. Now that is superpower ugliness of the first order. And you dare to put China in the same category?
China is far from perfect.

But to compare it to the US reveals a very sick mentality indeed.

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Video with English Subtitles: U.S. Will Not Gamble with Its Destiny to Help Taiwan: Expert 美國不會把自己國運豪賭幫助台灣的! 美國在中國一千海哩之內開戰, 美國必敗.
https://vimeo.com/660441546
https://youtu.be/HAZxJ_VSFME
https://www.facebook.com/100036400039778/posts/628784191678243/?d=n