Of course that came from a time when it was illegal to wear a mask when you walked into a bank. Now things are different and cash is suspect, while masks are not.
Fifteen years ago, cash transactions were the norm in China. Banks provided the archetypical brown envelope for large cash transactions. This had a dark side, as cash was the preferred medium for those who wished to settle unlawful transactions. At this time, China was infamous for its bribery and under-the-table transactions.
Government had become increasingly concerned at the scale of corruption and its impact on ordinary people. The Chinese tradition of gift giving had become a base for petty and large-scale corruption.
Things have changed and the changes are impacting on legitimate business transactions.
The first change is the move towards a cashless society. WePay and AliPay led the way. The introduction of DCEP – the digital yuan – signalled a government move into this area. The anti-corruption aspects of this are not accidental. These are positive steps that have made business and trade settlement more efficient.
However, the demand for ever-more documentation has bought with it a host of bureaucratic irritants. This is not unique to China and is no different from the increasingly intrusive Know Your Customer requirements imposed by Western regulators.
In recent months it has become increasingly difficult to manage payments from Chinese business to foreign businesses. Invoicing details must exactly match the details recorded by the bank and the paying authority. Payment delays due to bank requirements are becoming more common.
Starting March 1, the Action Plan on Banking Client Due Diligence, Identity, and Transaction Record-keeping Procedures lowered the threshold that triggers client due diligence reviews. The new threshold is now for any cash deposits or withdrawals over RMB 50,000 or US$10,000. This is part of a new crackdown on money laundering.
This cash-control measure complements the final launch of the sovereign digital currency The DCEP enhances the traceability and verifiability of all Chinese savings and financial transactions via the digital currency platform.
It is against this background that business needs to prepare to meet the complications that arise from China’s move away from cash and the increased bureaucratic requirements and delays that impact on existing payment processes. China company to foreign company payments have become slower and more difficult and that’s a potential problem for NT exporters.
Digital transactions are the way of the future but at times it seems that every economic development in China is seen by some as a precursor to economic doom. The latest round of economic figures attracted the same assessment. China is easing monetary levers as inflation cools further.
This is painted as an act of desperation because as inflation continued to cool in China in January it raised the prospect that the central bank may further reduce borrowing costs. This is even more of a problem at a time when the US and other Western economies are moving in the opposite direction.
It’s difficult to understand the position here. Is inflation a good or bad thing? For consumers, inflation is a bad outcome, and we see this anticipated impact roiling Western markets. Lower inflation is a good outcome for consumers and business because it enables business growth.
The years of low inflation and low interest rates have been hailed in Western markets for their contribution to economic growth. The market fear is that when this ends the economy and growth will suffer.
Apparently, all of these factors have the opposite impact in China when low inflation and low interest rates are said to be bad for the economy.
Inflationary pressures in China fell across a broad range of measures. For many observers, this is evidence of yet another coming collapse of the Chinese economy rather than evidence of a well-managed outcome that balances low inflation with sustained but lower levels of growth.
For the China bears, China’s latest economic data confirms expectations for more aggressive monetary easing as the government seeks to stabilise the economy to prevent a collapse.
Growth stabilisation means pulling back from the unsustainable growth rates above 6 percent that have characterised previous decades. The challenge is to manage a consistent but lower growth rate as the country moves out of the so-called middle income trap. Lower, and stable, growth rates are the characteristic of more mature economies.
China should be applauded for moving towards these objectives without the economic disruption and violent shifts in capital that have tarnished these transitions when made by other countries. Despite consistent criticism, China’s critics cannot point to any failure of Chinese economic management over the past 30 years. This suggests it’s unwise to bet against China.
China remains a stable and growing economic powerhouse. It is the most important trading partner in our region and for our regional trade partners. Northern Territory business cannot afford to ignore these developments.