China Can’t Afford a Cashless Society
foreignpolicy.com
foreignpolicy.com
Ironically I recently realized tourists visiting China might be victim of this too. If you're coming to China you won't be able to do much until you open a bank account and get a local phone number.
More and more restaurants or stores only accept mobile payment using wechat/alipay but short term visitors won't be able to open a bank account (even if you try these days, many banks will refuse you if you have a tourist visa). Visitors also won't be able to get a subway card on their phones, can't rent shared bikes, and won't be able to order a taxi using the local "uber" because all of these require a local bank account too. Even my local coffee shop only accept payment through their app with gives you a QR code to get your coffee, no cash.
Even more ironic, if you do go through the trouble, open a Chinese bank account and use the local payement apps (WeChat/Alipay), you won't be able to use it back in your country - even if the stores in the airport accept Alipay for example, only users with a Chinese ID can use it outside of China.
I think you’re right though: this is going to be a concern for tourists to China. Maybe that won’t be a concern for the locals or maybe the cashless services will figure out some way to take foreign cash for electronic credits, like these exchange services are doing.
https://www.statista.com/topics/1210/tourism-industry-in-chi...
China isn't a tropical island country with 75% of income from Tourism. It may be an acceptable risk to inconvenience tourists to have the desired local monetary policy?
ie Also quick googling but honk kong apparently has 16% of its income, and 20% in 2014, from tourism[1]. (currently trending downwards, perhaps related to this?) This is also presumably the kind of area where these apps are most important.
I'm also not sure it constitutes desired monetary policy, so much as an accident of natural processes that wasn't stopped. Whether they like it or not, I doubt it was planned, and I doubt it was truly wanted. More like, accepted.
[1] https://knoema.com/atlas/Hong-Kong/topics/Tourism/Travel-and...
https://www.quora.com/How-can-tourists-in-China-use-mobile-p...
More to the point: green cards are so rare most Chinese institutions don’t know what to do with them. They don’t actually help that much beyond just getting into the country.
Buying an apartment is usually just subject to residency restrictions whether you are Chinese or a foreigner. Beijing requires that you’ve paid Beijing social security taxes for 5 years if you don’t have hukou, which equally applies to non-Beijing Chinese.
You won’t be able to get a SIM card either unless you are a Chinese citizen(or have a citizen get one for you)
Maybe those are all registered on a random citizen's ID, but given the scale and visibility of that business, it seems unlikely that all of that is happening in violation of the registration requirements.
Some China Mobile/Telecom chains, in general, will refuse to sell SIM cards to foreigners, even if you got a passport. China Unicom, however will sell them to you, if you got a passport. So the responses here are also not 100% accurate, if I'm being fair :)
Have a group of friends touring China right now. They tried for days to get a SIM card but finally gave up - nobody would sell one to them!
The only place they did not try was a vendor at the airport where they arrived. They judged that vendor would be overpriced so waited until they got into the city.
Yup, this happened to me just less than a year ago. I spent extended time in Xiamen and I had to open a bank account, get a local phone in order to WeChat verify and also use AliPay. Once I did that it was smooth sailing. Yes, when I returned home all of this was for not. I can't use it unless I return.
Also, even though I had RMB nobody wanted to take them. Often they dont have money for change, etc. My phone was my best friend the entire trip.
> The Yuan government attempted to prohibit all transactions in or possession of silver or gold, which had to be turned over to the government.
> Under Külüg Khan the levels of inflation rose to 80% as the government kept printing more banknotes due, and in order to ensure the government’s control on the currency Külüg Khan [r. 1307-1311] banned the usage of silver and gold coins, and stopped the circulation of silver certificates in favour of fiat banknotes. ( https://en.wikipedia.org/wiki/Yuan_dynasty_coinage )
But that was a massive failure by a khan who reigned for three and a half years.
Thinking on it some more, I think her information may have come from something ibn Battuta had written, which matches your time period, and also explains perhaps why she didn't have much to say about how well it worked.
I also think the book was from the late 80's so I wouldn't be surprised if historians have learned much more since then!
edit: to zht's comment, I did have a US cc added.
Just visited China a few weeks ago. While it is not possible to open an AliPay account, you can verify WeChat pay with a foreign CC. You then have a problem of getting RMD actually added into your WeChat wallet; while I worked with a friend to manually transfer currency (Venmo'd him USD, received RMB from him over WeChat), my friend also recommend https://theswapsy.com/.
Warning: WeChat has absolutely terrible customer support compared to Alipay. My account got locked at one point and somehow magically opened up after a few days - I could never get a hold of any CX agent.
Both WeChat and Alipay are expanding aggressively abroad but their primary motive is just to make things easier for Chinese tourists traveling abroad.
I don't see the "many places will not accept cash" problem that the article suggests is widespread.
I'm in Shenzhen once or twice a month and haven't had any problem paying with cash - taxi drivers and vendors don't complain.
Vendors being unable to give change for 100 CNY bills was a frequent problem 10 years ago and is still periodically a problem. More often than not the solution is still the same as it was 10 years ago: insist that this is all you have. Half of the time the vendor really does have change and just didn't want to give it to you. The other half of the time the vendor really didn't have change and will ask a neighboring shop for change.
https://aeon.co/essays/if-plastic-replaces-cash-much-that-is...
It's almost like we would need a digital, global, censorship resistant currency
What would be the transaction cost for a couple-euro-equivalent vending machine purchase, using Bitcoin today? What about the cheapest (per transaction) cryptocurrency out there?
Bitcoin Layer 2 (lightning network) ~= 0.0005 euro
Source: https://twitter.com/alexbosworth/status/1029425619350642688 These costs are independent of the bitcoin amount transfered.
>blockchain solutions implement this as many, distributed middlemen, IIUC
There are no "middlemen" required to transfer bitcoin via layer 2. "Middlemen" required to transfer bitcoin via layer 1 are miners and a peer (could be the miner) to relay a block to you.
https://medium.com/@nopara73/stealing-satoshis-bitcoins-cc4d...
"Satoshi accumulated about 1 million bitcoins, 1/21 of the total coin supply, many of them are sitting on public keys due to this early feature. This one million Bitcoin is poised to be stolen within 5 to 15 years. Or even sooner, depending on, if secret government projects are still a thing."
At price of $6K/BC, there seems to be $ 6 Billion incentive to build that quantum computer to hack his pirate key.
If/when that happens, it will be interesting to see what will happen for the rest of crypto base eco-systems.
That's the same OOM as what one might expect from a traditional payment card processor (although I don't think it's ever a flat fee, but that's less relevant in the context of transactions that would otherwise be in cash, presumably low-value ones).
> Source: https://twitter.com/alexbosworth/status/1029425619350642688
I'm not sure if that's someone who's a well-known follower of Bitcoin costs or just a random person who tweeted. I'm willing to take your word for it, however, without a source.
> There are no "middlemen" required to transfer bitcoin via layer 2.
If that's the case, why is the transaction cost greater than zero?
I'm not the least bit familiar with "layer 2". If it's well-understood enough that it's just as trustworthy as the underlying currency, then it would make sense to use it. But, then, why would anyone ever use "layer 1" in the first place?
> "Middlemen" required to transfer bitcoin via layer 1 are miners and a peer (could be the miner) to relay a block to you.
Yes, the miners were the middlemen I was considering. Since they have to be paid, blockchains will never have free (gratis) transactions.
One of the comments theorized that this was because the ATM service used only 2 verifications instead of 6, taking a slightly higher risk due to the small transaction amount (which implies a typical wait time for a large amount of an hour, not 2 weeks).
Of course, even 20 minutes is too long to wait for a vending machine transaction, so your point still stands. I also found an article [2] that incorporates the problem of delay in even determining what the fee would be.
What was also interesting is that it [2] detailed a transaction cost 8x what was quoted above, and seems to be backed up by https://bitinfocharts.com/comparison/bitcoin-transactionfees... . It brings a new concern, volatility, to someone like a vending machine operator whose transactions aren't "micro" but are always going to be on the small end of "every day".
Presumably, it's possible to have a cryptocurrency without these issues. Lightning may sufficiently solve this for Bitcoin (and/or other cryptocurrencies), but that has yet to be seen in practice, at scale. If a DDoS attack forces all (or even just some) Lightning transactions on-blockchain, what does that do to transaction times and costs?
[1] https://news.ycombinator.com/item?id=17898721
[2] http://moneyandstate.com/the-true-cost-of-bitcoin-transactio...
(I think)
> In many cities, cashlessness is so common that panhandlers and street musicians use WeChat and Alipay QR codes to ask for change. But these anecdotal cases obscure some of the class-related issues that cashlessness can’t fix, and may worsen. The 2017 World Bank Global Findex database, which measures financial inclusion, estimated that some 200 million Chinese rural citizens remain unbanked, or outside of the formal financial system. Cashless payment systems by design require formal enrollment in banks, which are then tied to the mobile payment platforms that WeChat and Alibaba host.
I think this is the dubious claim. According to comments in this very thread and on other sites, you don't.
Here in Australia, WeChat/Alipay are starting to proliferate in Chinese shops & restaurants, but it's impossible to join either locally. No shop that I know of will reject cash, but "cash or WeChat/Alipay only" is fairly common.
Me neither, opening a bank account takes one hour, costs less than one dollar, you get the bank card the same day, and there are no monthly fees (for debit card). The only case where it could be difficult is for people without ID (ie second child that were hidden back when the one-child policy was still enforced)
The real risk is the fact that Alipay and Wechat can now ban anyone from having a normal life in China - they can suspend your alipay and wechat accounts and you are totally screwed.
In my view, there is a real concern that these platforms are becoming major financial institutions without being subject to financial/banking regulations.
At some point the Chinese government will have to look into that.
Scoring risk and determining borrowing rate at scale could see tremendous efficiencies once a lot of data is obtained. Square Capital, for example, simply uses a fixed rate around 10% against sales that is automatically deducted from daily tills. But for micro-transactions, I don't see why 4-5% can't be achievable. If the global rate of repayment skews much higher.
https://technode.com/2018/08/02/the-rise-and-fall-of-chinas-...
alipay is reporting losing 5 Yuan out of handling every 10 million Yuan of transactions. that is the risk level for the topic matter.
It might be possible to solve the issue of cashlessness by making it even easier for the poor to use it, perhaps by providing super cheap cards that somehow let people still make/receive payments without phones?
It would be beneficial for all of society if everything was accounted for, but only if everything was completely transparent, so that everyone can see what everyone is doing to hold each other accountable. Right now, we’re heading towards the worst system. The ones with the guns and bombs (power) get to see what all the masses are doing, but the masses don’t get to see what they are doing.
for 99% Chinese, as of writing, the Chinese government doesn't care what they are doing when it comes to personal tax. the fundamental difference here is that 90% of the tax collected by the Chinese governments are from companies, personal tax including those doing family business only counts for a very small %. that is the exact reason why small business vendors all started accepting mobile payment - they know full well that there is no tax risk for doing that.
things only become different when you are the big fish in the pond - if you only have a few million $ worth of black money, the safest place to keep it is your local branch of the biggest state owned bank.
SO there is no risk right now. But what happens if I make the wrong person mad? Now there's a trail of cash that I haven't paid tax on, and they've got me.
It just seems like a way to bake possible governmental control into an uncontrollable system like black money.
always pay your tax OR be nice. both are actually easy!
Your statement. I understand that to avoid getting caught for breaking the law, don't break the law.
But this conversation was in the context of black markets and their 'no risk' existence at the good graces of the Chinese government.
What you call 'no risk' is actually just hard-coded blackmail from the government, I believe.
In case you're not familiar, US debit cards are tied to a bank account, but weirdly can be used without a PIN if they are run as a credit card anywhere that takes MC/Visa/whatever-the-issuer-is.
However, the charge is deducted immediately from your account as would a debit charge.
This means if there's fraud, even if you are refunded eventually you will be without access to money for some period of time.
The easy fix is to withdraw some cash for day to day stuff from a trusted bank ATM rather than constantly swipe your card.
Even if the government provides you a no frills bank account, the fraud risk would make many prefer to use their card as little as possible in the USA.
This is why they are issued to people who are underage or a credit risk since they can't run an offline transaction without coverage in the account.
Not accepting cash is a form of economic racism. And it's slowly creating sunset towns where normal people trying to transact with other people aren't allowed. You have to have a corporation vouch for you.
But especially in China, where buying the wrong products might be bad for you social score, I would vastly prefer cash.
I wouldn't want to get any data in the hands of insurance companies either.
Cashless payment is easier? Depends on the scenario. I can just give anybody 20 bucks without any third party involved. You cannot beat that with any technical solution.
Well, sure, if the good costs $20. If it doesn't, hope they have change. Or you have change. And carrying around tons of change is definitely painful.
If enough vendors stop accepting cash, then that alone ought to be reason enough for people in rural areas to make the effort to get/purchase these devices, assuming Wechat/Alipay makes the effort to distribute them.
Though it seems that there is limited market value to doing such a potentially expensive and politically tricky maneuver. Classic scenario in a capitalist world—the market doesn't see profit in protecting a helpless class like the poor and elderly, so the market proceeds to ignore them and screw them over.
For realz tho', greater marginalization of the poor thanks to a move towards digital reminds me of the many services that require an active internet connection. I once had an internet provider ask that I look up their online FAQ if I had trouble installing my internet connection. (thanks local ISP!)
It's like the saying goes: "it's expensive to be poor".