Policy Forum 10 (November 2019)
According to a recently broadcasted news report, Chinese President Xi Jinping officially announced that China should take advantage of the opportunities offered by blockchain technology. In other words, I can interpret that China will pursue RMB payment for international trade using blockchain technology. This announcement is drawing much attention as it presents very important implications during the current trade war between China and the United States. I believe that Renminbi trade settlement using blockchain technology will benefit China in many ways.
First, I expect that RMB trade settlement will contribute much to the internationalization of Renminbi which is one of the goals driven by the People's Bank of China, the Chinese central bank. Compared to the size of China's economy, which has risen to the G2 level, the share of Renminbi used in international trade settlement is only about 1 or 2%. In addition, although Renminbi has been treated as one of the IMF's SDR currencies for several years, it is undeniably true that Renminbi's status in world trade settlement is not so high. If China, the world's largest commodity trading nation, can use the Renminbi as a trade settlement currency using blockchain technology, the internationalization of the Renminbi will be easily achieved. Most of all, if blockchain technology is used, the transaction settlement records are secured by the participants of the system jointly through recording, verifying and storing the transaction information without a centralized agency. Therefore, if someone wants to manipulate the transaction record, all the linked blocks between the participants must be manipulated before creating a new block. In other words, all of the numerous blocks must be manipulated within a certain time, which is virtually impossible and therefore highly secure. In addition, the blockchain has a merit of dramatically lowering transaction costs since it is a disintermediation without going through an intermediary, and above all, it can make a significant contribution to the rise of the Chinese RMB into the world's key currency in international trade. If so, how can we overcome the trust issue of the conservation of Chinese RMB value, which can be questioned by international trade participants? It can be solved much easier than we think. After payment with the Renminbi in international trade, if the guarantee of exchange for the Renminbi used for settlement with gold traded on the Shanghai Mercantile Exchange, the other countries or companies that have received the Renminbi payment will be able to trust the Renminbi more than before.