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      in World Politics

      Will China’s Digital Currency Revolutionize Global Payments?

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      China is well on its way to becoming a cashless society. More than 600 million Chinese already use Alibaba’s Alipay and Tencent’s WeChat Pay to pay for much of what they purchase. Between them, the two companies control approximately 90% of China’s mobile payments market, which totaled some $17 trillion in 2019. A wide variety of sectors throughout China have since adopted Blockchain to pay bills, settle disputes in court and track shipments. The Chinese government understands that, via Blockchain, the issuance of its own cryptocurrency is an excellent way to track and record the movement of payments, goods and people.

      Beijing Wants to Rewrite the Global Rulebook

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      The unsexily named Digital Currency/Electronic Payments (DCEP) is intended to be used by anyone around the world to purchase anything. It has the potential to revolutionize the global payments system. Assuming it succeeds, many other countries will want to emulate it. Some other governments have already launched similar initiatives, but not on the scope or scale of the DCEP, which promises to be the first global digital currency.

      Digital Wallets

      What appears to have spurred the Chinese government to actively pursue the DCEP in 2019 was the birth of an organization that also has the potential to revolutionize the global payments system, the Libra Association. Libra is a grouping of more than two dozen organizations creating the world’s first Blockchain-derived global payment system, specifically founded on best practices in regulation and governance. Its stated objective is to transparently bring access to financial services to billions of people who either have limited or no access to the existing global banking system.

      Embed from Getty Images

      Given that it is an American-led initiative that will use the US dollar to determine its benchmark value, Beijing viewed Libra as an attempt to establish US dominance over the global cryptocurrency marketplace. It previously viewed other cryptocurrencies as a threat to its own hegemony over capital controls in China.

      Although its motivations to counter the US are clear enough, much remains unknown about the DCEP. One has to wonder just how much focus it will have on transparency, governance or best practices. It will not be available on cryptocurrency exchanges, nor will it be available for speculative purposes. Embracing Blockchain and creating a DCEP ecosystem will give the Chinese Central Bank unprecedented power over capital movements — certainly in China, but also around the world.

      Like Alipay and WeChat, the DCEP will require a digital wallet, but it will not require a bank account. Commercial banks will issue the digital wallets, but no internet connection will be required to conduct transactions via the DCEP. All that will be required is that a phone has battery power. While a certain degree of anonymity will be present with the DCEP, the Chinese Central Bank will still be able to track who spent or received funds, when, where and from whom. The Chinese government calls the concept “controllable anonymity” and will rely on Big Data to identify behavioral characteristics of the individuals and businesses using DCEP. Doing so will help the government identify money laundering, tax evasion and terrorist financing. It will, of course, also permit a higher degree and quality of state surveillance of Chinese citizens and citizens of any other country that may use it.

      Since the Chinese government will be the first to launch a global digital currency, it will gain a considerable lead over the world’s nations and provide it with the ability to perfect its surveillance capabilities in China and around the world for any country that chooses to adopt the DCEP. It will also help to internationalize the yuan and simultaneously create less dependence on the US dollar. So, the Chinese government intends to stay a step ahead of the competition, enhance its ability to monitor its citizens, broaden its soft power and increase China’s appeal to other countries while countering the supremacy of the US dollar in the process.

      Alternative System

      By issuing the DCEP, the Chinese government hopes that demand for yuan reserves will follow, facilitating a digital version of the yuan as a global alternative to dollar reserves, especially in Belt and Road Initiative (BRI) member nations seeking to modernize their financial sectors. It could also help internationalize China’s e-payment systems, which are not used outside of China. In the absence of an American cryptocurrency, which seems to be a long way off, doing so could in theory make the DCEP the cryptocurrency of choice among BRI (and other) countries.

      Such an alternative system may be particularly appealing for countries under US sanctions, which may wish to avoid using the US dollar entirely, or for countries or businesses engaged in trading, investment or lending with Chinese companies. But the yuan remains not fully convertible, with just 1% of international payments using it. That could have a significant impact on the government’s implementation strategy. In addition, the Chinese government is attempting to centralize what is a decentralized technology by requiring that all “nodes” using the Blockchain register with the government and provide information about their users.

      While the Chinese people are accustomed to having their government pry into, and try to control, their private lives, most of the world’s population wants nothing of the sort. It remains to be seen just how broadly the DCEP will be adopted, or whether it will turn out to be a net positive for the nations that choose to use it, but having the first-mover advantage will surely serve Beijing well. Despite its apparent flaws, if it also helps to bring some of the world’s poorest nations with the least access to basic and global financial services on par with the world’s developed nations in that regard, Beijing will have done much of the world’s population a great service in the process.

      *[Daniel Wagner is the author of “The Chinese Vortex: The Belt and Road Initiative and its Impact on the World.”]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

    • 175 Shares149 Views

      in UK Politics

      Rishi Sunak's 'flawed' job support scheme puts three million jobs at risk, Labour warns

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      The jobs of almost three million people working for small businesses are at risk because of Rishi Sunak’s “flawed” job support scheme, Labour has warned.Shadow chancellor Annelise Dodds accused the chancellor of “pulling up the drawbridge” on workers who had put their faith in him and forcing employers to choose which staff to keep and which to fire.Thursday marks a critical deadline for jobs as it is one month until the furlough scheme ends and firms that wish to make 20 to 100 staff redundant must start 30-day consultations or face paying more in wages.The new scheme that replaces furlough incentivises employers in financial trouble to sack staff by making it more expensive to keep two people on reduced hours than to sack one and keep the other.Viable businesses that need support to cope with restrictions imposed on them by the government now face tough decisions.
      “They pinned their hopes on the Chancellor to deliver, but he’s pulling up the drawbridge at the worst possible time,” Ms Dodds said.
      Read more“This wasn’t by accident – it was by design. This sink or swim mentality is a throwback to the worst days of Thatcher, and just like in the 1980s people on the lowest incomes will pay the highest price.”
      Some 2.8 million people working for small and medium-sized firms were furloughed under the Job Retention Scheme, Labour estimates.
      While many of those will have since been brought back to work, new national restrictions imposed last week, as well as local lockdowns across much of the North of England mean that around 133,000 SMEs cannot operate at all or are trading at reduced capacity, according to the party’s figures.Restaurants, licensed clubs and event operators are among those worst affected.
      Over a million SMEs are also still experiencing a fall in turnover, with approximately 310,000 turning over less than half what they did over the same period last year.  Labour calculates that bringing back one bar manager full-time will cost £455.30 per week, but it would cost £610.89 for the same bar to bring back two workers for half their working week, a difference of £155.60  Ms Dodds called for an urgent meeting with her opposite number to discuss the scheme and better support for workers.Citizens Advice warned of a “bleak winter” after a sharp rise in the number of callers worried about losing their job when the furlough scheme ends.Read moreAndy Gillett, a telephone advice manager at Citizens Advice Blackpool, says: “Work worries are really ramping up. With the end of the furlough scheme in just a few short weeks, a lot of people feel like they’re in the waiting room for a redundancy.
      “There’s a sense of underlying anxiety, but at the same time people are trying to be practical, for example asking how they’d go about claiming benefits or what they can do about their bills if they suddenly lose their income.
      “The hardest thing is people saying that if they lose their job there won’t easily be another to go into – for many, that’s the reality of the labour market.”
      Dame Gillian Guy, Chief Executive of Citizens Advice, said:  “The furlough scheme has been an extraordinary intervention, but as it draws to a close we could face a bleak winter of redundancies.
      “The Chancellor has acknowledged that the new Job Support Scheme won’t protect every job. While people look for work it’s critical our benefits system provides a strong enough safety net.
      “Making the £20 uplift to Universal Credit permanent would provide some much-needed security as we weather this storm.” More

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      in World Politics

      Mauritania’s Fading Promise and Uncertain Future

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      Mauritania is rarely in the news. A member of the Arab League, it shares with its southern neighbor Senegal a large offshore gas field that promises to bring a potentially huge windfall to the impoverished northwest African nation. The Greater Tortue Ahmeyim field sits in the Atlantic Ocean off the coast of the two countries at a depth of 2,850 meters. According to BP, which is invested heavily in the field, it has an estimated 15 trillion cubic feet of gas and a 30-year life span.

      The company signed a partnership deal in late 2016 with Kosmos Energy to acquire what it described as “a significant working interest, including operatorship, of Kosmos’ exploration blocks in Mauritania and Senegal.” BP’s working interest in Mauritania amounts to 62%, with Kosmos holding 28% and the Mauritanian Society of Hydrocarbons and Mining Heritage the remaining 10%.

      Guyana’s Bright Future Is Under Threat

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      BP says it is committed to sustainable development and promised a variety of programs to train Mauritanians, create jobs, contract local companies and build third-party spending with those companies. It has made further commitments to health and education projects, social development, capability building and livelihood and economic development.

      Basket of Worries

      But with the gas market depressed by a combination of COVID-19 and unusually warm winters in Europe, the bright hopes for Tortue Ahmeyim are already starting to fade. The initial goal of a staggered launch in three phases in 2020 to bring the field to full capacity by 2025 has been shelved. Phase one is now pushed back to the first half of 2023, with the Middle East Economic Survey (MEES) quoting Kosmos CEO Andy Inglis in May as saying that a final investment decision on phases two and three will not now be considered “until post-2023 when we’ve got Phase 1 onstream.” The goal of reaching full capacity is pushed back toward the end of the decade.

      Embed from Getty Images

      What may be more unsettling for the government of President Mohamed Ould Ghazouani was BP’s announcement in the summer that it will slash oil and gas output by 40% over the next decade. That was followed by the 14 September release of the company’s Energy Outlook 2020 that presented scenarios where peak oil demand had already passed or would pass by the middle of the decade. It is important to note that, presenting the Outlook, BP’s chief economist, Spencer Dale, underlined that “The role of the Energy Outlook is not to predict or forecast how the ‎energy system is likely to change over time. We can’t predict the future; all the scenarios ‎discussed in this year’s Outlook will be wrong.” That may be cold comfort to President Ould Ghazouani.

      The hard fact is that early ebullience about the potential of the Tortue Ahmeyim project by its consortium backers has now been replaced with an abundance of caution and with brakes strongly applied. So much so that James Cockayne, of MEES, opined: “The likelihood of these developments ever seeing the light of day, at least under BP’s stewardship, needs to be considered anew in the light of the latest far-reaching strategy shift from the UK major.” His gloomy conclusion was that “Mauritania’s hopes of gas riches appear to be hanging by a thread.”

      The president has another issue weighing heavy in his basket of worries, and that is the question of normalization with Israel. Commentators have anticipated that Mauritania would join the UAE and Bahrain in recognizing Israel, especially as Tel Aviv and Nouakchott had diplomatic relations from 1999 to 2009. In 2009, Mauritania froze relations in protest at Israeli attacks on Gaza.

      The UAE’s Mohammed bin Zayed, the Abu Dhabi crown prince and de facto ruler, has been the driving force in Arab normalization with Israel. With Ould Ghazouani in attendance in Abu Dhabi, in February bin Zayed announced $2 billion in aid. For a country with a GDP that the World Bank estimated in 2018 stood at just over $5 billion, that sort of largesse buys a lot of influence.

      Normalization Bandwagon

      But the president is well aware of the strong sentiment within the country for the Palestinian cause. Tewassoul, the opposition Islamist party, was instrumental in 2009 in bringing protesters onto the streets of the capital demanding an end to diplomatic links with the Israelis. The party also backed the candidacy of Sidi Mohamed Ould Boubacar in last year’s presidential election. Ould Boubacar took 18 % of the vote, while another candidate and leader of the anti-slavery movement, Biran Dah Abeid, scored a similar percentage. Ould Ghazouani won with 52%, with the opposition denouncing the election as rigged.

      Although Mauritania officially outlawed slavery in 1981, the practice continues, with approximately 90,000 out of a population of 4.6 million enslaved. That situation caused US President Donald Trump’s administration to revoke Mauritania’s preferred trade status under the African Growth and Opportunity Act. Justifying his decision, Trump cited the fact that “Mauritania has made insufficient progress toward combating forced labor, specifically, the scourge of hereditary slavery.”

      It may be that if he wins reelection, Trump will revisit that decision and offer to drop the revocation as a carrot to bring Mauritania onto the normalization bandwagon. That would, of course, do nothing to hasten the end of slavery. As Human Rights Watch (HRW) notes in its World Report 2020, the Mauritanian government is doing precious little itself: “According to the 2019 US State Department Trafficking in Persons Report, Mauritania investigated four cases, prosecuted one alleged trafficker, but did not convict any.” HRW also detailed numerous human rights abuses, the stifling of free speech and the harassment and arrest of opposition politicians and activists, including the anti-slavery movement leader and presidential candidate Biran Dah Abeid.

      There is no doubt that the promise of economic gain that Tortue Ahmeyim represents could go some way toward steering Mauritania onto a modernizing path. Though the 2019 presidential election was challenged by the opposition, it did represent the first peaceful transition in the country’s long history of military coups after gaining independence from France in 1960. That, coupled with the windfall the gas field could bring, is a step in the right direction. But if the Tortue Ahmeyim project falters, so too will Mauritania’s chances for a better future.

      *[This article was originally published by Arab Digest.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

    • 138 Shares139 Views

      in UK Politics

      Sunak’s plaster is no cure. It can’t hide the bigger problems

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      Whenever I think of Mrs Thatcher I come back to that picture, the one of her wandering across an industrial wasteland. It must be the northerner in me, but I can’t forget how the iconic photo was accompanied by not much at all. The emptiness of the landscape was matched by her sheer absence of a shared understanding and compassion, call it empathy.She had many qualities but Thatcher failed to see beyond the demon she held responsible for the desolation: the trade unions. Defeat them, the prime minister reasoned, and all would be well: Britain would go on to prosper, its economy would flourish, hidden entrepreneurs would come to the fore and shine.Hammer them, she certainly did. And while in many respects her crusade was brave and correct – the country really was being shackled – once victory had been secured, it was accompanied by nothing. Unforgivably it was followed by neglect. More

    • 188 Shares109 Views

      in UK Politics

      No-deal Brexit will lead to £1.3 billion a year rise in food and drink tariffs

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      Supermarket shoppers will face up to £1.3 billion tariff per year on food and drink unless the government secures a free-trade deal with the EU.New analysis from the UK’s leading trade body, The British Retail Consortium (BRC), reveals shoppers will continue to face higher prices for their weekly shop.According to the trade body, these mammoth tariffs can be mitigated if a deal is agreed before Christmas. The report says retailers will have “nowhere to go other than to raise the price of food” while many non-food retailers will face similar “large tariff bills” for EU-sourced products.Watch moreAndrew Opie, director of food and sustainability at the BRC, said: “Unless we negotiate a zero-tariff deal with the EU, the public will face higher prices for their weekly shop.”He added: “This would prevent harm to shoppers, retailers and the wider economy.” The EU is the largest UK trading partner, where four-fifths of the UK’s food imports are sourced.Watch moreThe new tariff schedule will be implemented from 1 January next year if a deal cannot be agreed.The retail body analysed the UK’s new tariff schedule, finding that 85 per cent of foods imported from the EU will face tariffs of more than 5 per cent. Read moreIt is thought that poorer households will be hit hardest as they spend a higher proportion of income on essentials. David Potts, CEO of Morrisons, has warned the government to secure a tariff-free deal to mitigate this rise in the price of groceries.The schedule will see a 48 per cent tariff on minced beef, 16 per cent on cucumbers and 10 per cent on lettuce.Read moreEU goods such as wine from Italy, France and Spain will become £2 more expensive per bottle while cheese will see up to a pound price increase. There will be a 10 per cent tariff on cars made in Europe.The latest monthly retail price index for August revealed fresh food prices increased by 0.2 per cent, while inflation for ambient food rose to 2.8 per cent for the month.Watch moreMr Opie said: “UK consumers have benefited from great value, quality and choice of food thanks to our ability to trade tariff-free with the EU. There is no time to waste, the UK and EU must hammer out a final arrangement as soon as possible.”Watch moreHe added: “Coronavirus is already making life hard for consumers, particularly those on lower incomes, and a no-deal Brexit will have a massive impact on their ability to afford essential goods.”It reported that a “no-deal Brexit would represent a further major shock to the UK economy” with a “major set of changes” to the country’s economic relationship with the EU. More