If you have "smart contracts" to pay on delivery rather than paying in advance with a bank loan.
How does this work? Won't companies still need to generate revenue to pay for the goods?
There's mention of 5G but 4G can do contracts?
They also say China's goal is not to be a reserve currency but something new, completly different from banking since the 13th century.
But I dont think they explained how, unless I missed it
1. State/progress information provides more trust as more progress information becomes available, and therefore less trust is needed from financial instruments such as escrow. Much of the new information is provided via 5G and the internet.
2. The US has derived enormous benefit from these financial instruments, since they often provided the US with an interest-free loan as a side effect. As these instruments are less needed, less money will be lent to the US on these terms, so the US needs to either borrow less or pay for interest-bearing loans like the rest of us.
3. The US federal government doesn't understand what's coming.
(I disagree with one of the points. The above is a summary, not my opinion.)
Certainly China will also be able hide more money printing behind the app. They can give out Digital Yuan as stimulus unlimited and no one would know any better.
https://thesoundingline.com/kyle-bass-china-has-printed-more...
https://thesoundingline.com/chinas-money-supply-has-outgrown...
What if it is actually true that China doesn't want to be a reserve currency and own seniorage from the rest of the world? (As Chinese leaders repeatably have said.)
What if they instead want better credit mechanisms, risk controls and logistics? So credit creation can be backed by future oil produced by Iran, future jet planes produced by Russia, future phones produced by China. And trade can be settled with very little actual central bank currency moving around.
What if it is actually true that China won't militarize reefs in the South China Sea or encroach on Hong Kong's autonomy, as Chinese leaders repeatedly said?
Oh, wait...
Today, people ship little things in their containers that report e.g. temperature aberrations, so when you take delivery of something you can see whether it's been cooled continuously. The article is saying that these things will instead report temperature (and other things) online, so you can monitor the temperature in each container of your mango/yoghurt/fish/… shipment in real time.
If you as buyer don't want to, why would the seller care? But if you want to sell to a buyer who's used to that from many other sellers, you might have a problem. So Chinese technology replaces dollar escrow.
If the need for escrow diminishes because trust is provided in other ways, then it doesn't really matter to the escrow agency which currency the former customers now use to settle their purchases.
This second scenario you won't have your money stalled for months while paying for it.
tldr;
> Direct access to central banks will allow tech-enabled non-banks to offer payment services
> In the most disruptive case, banks lose deposit base, [and] credit creation [is] funded [directly] by central bank
> fintech transformation of the global payments system will bypass the banking system [predominantly in dollars]
Digital currencies, as backed by central banks, are just fiat currencies on a digital ledger.