Thursday, March 22, 2018

U.S. Plans Tariffs on Imports from China

The United States is preparing large-scale tariffs on imports from China, supposedly in retaliation for China’s intellectual property practices. At Politico:

Details are not yet clear. The process of creating tariffs goes through several stages that determine what goods are covered and the tax rate.

Monday, March 19, 2018

Social Credit Means Being Banned From Mass Transit

“Social credit” seemed too vague to matter when the Chinese central government first introduced the idea. It has more teeth now that people who have been marked for a series of minor violations will be banned from riding mass transit, or airplanes and trains at least. It will not be hard to get on the social credit blacklist, though it is not clear exactly how the list is formed. Based on official examples, a person can get blacklisted for one year for not paying taxes, advocating violence or repeating fake news on social media, or smoking cigarettes on trains.

Wednesday, January 24, 2018

South Korea Restricts Cryptocurrency

South Korea has taken steps to limit cryptocurrency trading that go beyond measures adopted last year in China. First there was a hint of a complete ban on cryptocurrency trading in South Korea, but that now seems unlikely. Instead, there is a new tax on cryptocurrency exchanges and restrictions on customers and transactions. Under new rules, customers are not permitted to be anonymous or outside the country. Transactions cannot be cleared using credit cards. Separately, there have been enforcement actions against exchanges that failed to properly protect customer privacy, a requirement that goes across the entire financial sector. China may eventually adopt its own versions of some of the measures being taken in South Korea.

Halfway around the world, transaction processor Stripe says it will stop processing Bitcoin transactions. In a blog post, the company cites the high volatility of Bitcoin and the high cost of transactions. The long delays, typically around 19 hours, in validating transactions are a concern. In recent trading, the value of Bitcoin has has fluctuated more than 10 percent during the transaction-clearing window, and these fluctuations represent a considerable risk for anyone who accepts Bitcoin as payment for physical goods. Stripe compares Bitcoin transactions to wire transfers. Either mechanism costs about the same, but wire transfers typically clear in less than a second.

Monday, January 15, 2018

CNN Notes Demassification

An intriguing headline from CNNMoney, in a story about Etsy.

Thursday, December 28, 2017

Reuters Report on Shadow Banking

The shadow banking system in China reminds leaders of the United States around 2005 — but China’s shadow banking is larger, more top-heavy, and less susceptible to centralized control. Authorities hope that reforms and arrests will prevent a sudden collapse in the future. From Reuters:

The danger is that a big default or series of loan losses could cascade through the world’s second-biggest economy, leading to a sudden halt in bank lending.

Top leaders in Beijing have acknowledged that the colossal volume of complex and potentially risky lending obscured in shadow banking compounds the threat posed by the economy’s tremendous accumulation of debt since the global financial crisis.

The full story is a long read at Reuters that may serve as a snapshot of the current state of the shadow banking system in China:

Friday, September 15, 2017

Cryptocurrency Exchanges to Close

Under new regulatory guidance, all cryptocurrency exchanges in China are telling customers today how and when they will stop trading. No new customers can be registered after today, and the exchanges have five days to send a wind-down plan to authorities. Exchanges cannot simply shut down today, but must minimize financial risk for their customers. Reuters story at Forbes: China Is Shutting Down All of Beijing’s Bitcoin and Cryptocurrency Exchanges.

The move is not a complete surprise after China banned cryptocurrency-based securities, released an official finding that cryptocurrency cannot be treated as currency, and urged licensed banks not to trade in cryptocurrency. Currency controls, though not fully effective, are seen by central government economic planners an important part of national economic controls, and cryptocurrency inherently has the potential to undermine or soften currency controls. One major bitcoin exchange had already announced it was closing at the end of the month, citing tighter regulation as its reason for closing.

Bitcoin has lost some of its value in recent days as officials and analysts have expressed skepticism about the format. Bitcoin fell 5 percent after China’s announcement on cryptocurrency exchanges, though bitcoin is highly volatile by nature. A 5 percent move would represent a panic if it occurred in a national currency but is expected in bitcoin, which is not considered a store of value.

Thursday, September 14, 2017

The Last Fuel-Burning Car

Fuel-burning cars are a problem. Everyone knows it, and several countries have already announced plans to phase out fuel-only cars within 20 years. It was policy announcements from France and the United Kingdom that go this particular ball rolling, and the list also includes Norway and India. Japan and almost half of Europe have official policies limiting the number of fuel-burning cars in the future, and still more countries have government programs such as tax incentives to boost sales of zero-emission vehicles. Germany, the inventor of the internal combustion engine, is guiding its automakers toward a zero-emission future, although no official policy has been adopted yet.

China might be moving slower, but no one should imagine that Chinese drivers will continue to watch the country’s most expensive import go up in smoke while rest of the world switches to electric. Officials involved in the planning have told reporters that China is likely to release a plan in line with the timetable that France has announced. I believe the timetable for the phaseout of fuel-burning cars in China will be a few years faster because of the enormous risks China faces if it falls behind on such a large worldwide trend. The risks China faces if it is ahead of the curve are slight by comparison.

The pre-announcement of a phaseout is meant as a signal to both domestic and foreign manufacturers. Factories in China are on notice not to invest in any more capacity for manufacturing fuel-burning cars. Foreign manufacturers are being told to have their zero-emission options ready within a few years or risk being shut out of the China market.

The move from gasoline to electricity has picked up in the last two months now that Tesla is shipping a mass-produced electric car that blends in on the road and has not demonstrated any obvious glitches in its first few weeks. The question is no longer, “Will it really work?” or “When is it coming?” but “How fast will it go?” As drivers gain confidence in electric cars, the transition could be much faster than the timelines that national planners are drawing up. Some traditional auto manufacturers, most notably General Motors, will surely not be ready in time.