Cash may disappear in China as payments go digital: PBOC

Bloomberg

Just because China’s financial regulators are cracking down on cryptocurrencies doesn’t mean they’re souring on the idea of digital money.
People’s Bank of China Governor Zhou Xiaochuan made that clear at a press conference in Beijing, saying physical cash may one day become obsolete. Zhou said the PBOC is looking into digital currencies as it pursues faster, cheaper and more convenient payment methods, even as he warned that cryptocurrencies like Bitcoin — more often used for speculation than payments — don’t serve the economy.
“We must prevent major mistakes that would lead to irreparable losses, so we are cautious,” Zhou said during what may be one of his last public appearances before his expected retirement. “We don’t like creating products for speculation and making people have the illusion that they can get rich overnight.”
China, once home to the world’s most active Bitcoin exchanges, banned the venues last year amid a broad-ranging clampdown on virtual currencies. Yet the country is still the world leader in digital payments, thanks to the popularity of platforms developed by tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd.
Zhou has led the PBOC for 15 years, the longest tenure in the monetary authority’s history. NPC delegates will vote March 19 to appoint a central bank chief, who will face the challenge of keeping the economy growing while defusing debt risks and steering monetary policy. In recent months Zhou has capped his career as a determined advocate of financial openness, helping China’s yuan gain reserve-currency status, with warnings over mounting debt risks.
“I’ve spent so many years working in the financial system and many things have happened,” Zhou said with a touch of emotion. “It’s my honor to work with everyone to push ahead with financial reforms and opening up. I feel very honored.”
Though current bank regulatory chief Guo Shuqing and Hubei provincial party chief Jiang Chaoliang have both been tipped to replace Zhou, President Xi Jinping’s top economic policy adviser and newly-appointed Politburo member Liu He has recently been named by analysts in connection with the top monetary policy job and a vice premier position.
Zhou’s call for bold opening came just after US President Donald Trump announced broad steel and aluminum tariffs and as his administration is said to be weighing clamping down on Chinese investments in the country and imposing tariffs on a broad range of its imports. While China has, for example, announced the removal of foreign-ownership limits on its financial system, much of the economy is difficult for foreign investors to enter.
“He’s repeated what he’s been saying all his career: We must finish what we started in terms of liberalizing financial markets,” said Andrew Polk, co-founder of research firm Trivium China in Beijing.