News on China's scientific and technological development.

American restrictions on Ant Financial or Tencent do nothing because they are already restricted by China.

It's very difficult/impossible for non-Chinese banks to link with Alipay/WeChat Pay. And let's be frank, internationalization is not happening in the next five years, because of the capital flight fear.


What would be the practical effect of successful American sanctions? Well, how are WeChat Pay and Alipay mainly used outside China? The sad answer is tourism.

So what would happen if they don't work outside China? Well, Chinese tourists would buy less stuff outside China. The effect would be to improve China's current account balance.


As for WeChat Pay or Alipay somehow magically replacing SWIFT or the USD, let's be honest - that's a fairy tale (especially since China's capital account is and should remain closed). Can anybody imagine a French person using WeChat Pay in daily life? Can anybody imagine Toyota making billion-RMB international transactions using Alipay? WeChat cannot dethrone dollar dominance; only the euro can.

Wangxi said:

Undermining American Industrial Excellence: Controls on Wafer Fab Equipment and China

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The most interesting points

There has been a private industry study, which must remain anonymous, involving active industry players that has emphasized a somewhat slower replacement rate than what interviewees reported. By this estimate, to ready equipment for a cutting-edge de-Americanized fab would take four to six years.

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The report seems to approach de-Americanization with the historically reasonable assumption that firms are still generally on a commercial footing even with government subsidies playing a role as they always do in fabrication. With Sino-American technological rivalry heating up, this assumption may not hold any longer. When pressed into a corner, China might provide such large subsidies that less inefficient and thus more costly alternative equipment might become a viable alternative.

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Thus, the minimum amount of time would be more than three years if the estimates of interviewees concerning their non-American rivals’ capabilities are accurate.

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Hadoren said:

As for WeChat Pay or Alipay somehow magically replacing SWIFT or the USD, let's be honest - that's a fairy tale (especially since China's capital account is and should remain closed). Can anybody imagine a French person using WeChat Pay in daily life? Can anybody imagine Toyota making billion-RMB international transactions using Alipay? WeChat cannot dethrone dollar dominance; only the euro can.

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I would go out onto a limb and guess that the RMB becoming the key currency of the world is not an objective of the CCP at the moment. It could be sometime in the future, at the moment it is not.

The recently announced China - Iranian development deal, 25 years and several hundred billion, none of that should involve USD, the Euro, or SWIFT.

There was a report a few months ago that trade between China and Russia, less than 50% of that volume is settled in US Dollars anymore, and that figure in all likelihood go even lower. No reason to expect that trend to reverse itself and go the other way.

What will be interesting in the next few years is the relationship between China and ASEAN, after they sign the RCEP in a couple of weeks. It could make sense for countries in ASEAN to not use USD with trade with China. I wonder if Loas and Cambodia already has such arrangements?

As for the Euro, I thought most of European trade between those were done in Euros anyways. They have their currency block.

What is another interesting question for the future is the USD in the oil trade. As we know, China is the world's biggest importer of oil. What if Saudi Arabia for instance accepts RMB as payment? That is not much of a stretch. Venezuela at the moment, would accept anything for their oil, maybe even gold bananas from China, lol.

Being US Dollar free actually can have benefits for some countries in the world. Wasn't Venezuela using blockchain for payments for oil?

Wangxi said:

Undermining American Industrial Excellence: Controls on Wafer Fab Equipment and China

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This report has some interesting tidbits about the semiconductor equipment supply chain. The corresponding strategy that China should follow will be help develop and establish a supply chain free of the US EAR (export control). It doesn't have to be 100% indigenous Chinese ones, rather it should consist of:

• US equipment vendors with offshore production capabilities that design out the American contents
• Japanese/Korea/European companies that do not use US contents
• Chinese domestic companies

This is a better strategy than strictly relying on indigenous technologies both from a tactical and strategic standpoints. It is also more sustainable in the longer term. China will still develop and cultivate its own domestic champions, but is open to international cooperation, using its large market and own technologies as leverage.

As for timelines, it should adopt 3-5-10 years milestones, spanning two five-years plans, ultimately nurturing and developing an advanced semiconductor supply chain centered around China/East Asia.

One thing I worry about is if Moore's law is already nearing its end in the next few years, would seeking to redirect massive amounts of funding into caching up on semiconductors and fabrication equipment be detrimental to China's R&D of the possibly succeeding tech of the future (i.e. quantum computing)?

cbl21 said:

One thing I worry about is if Moore's law is already nearing its end in the next few years, would seeking to redirect massive amounts of funding into caching up on semiconductors and fabrication equipment be detrimental to China's R&D of the possibly succeeding tech of the future (i.e. quantum computing)?

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1. That is nothing to really consider. One problem at a time.

2. The problem in the face of a firm like Huawei right now, is to maintain production. That they have a stockpile of chips, and working at China speed to develop internal supply lines.

3. The long term, that probably would take care of itself. The urgency is on the short term, which naturally grows into the long term. That is how you fight a war, to calibrate your strategies together. Does this make Sun Tzu sense? Yes? No? Maybe.

horse said:

I would go out onto a limb and guess that the RMB becoming the key currency of the world is not an objective of the CCP at the moment. It could be sometime in the future, at the moment it is not.

The recently announced China - Iranian development deal, 25 years and several hundred billion, none of that should involve USD, the Euro, or SWIFT.

There was a report a few months ago that trade between China and Russia, less than 50% of that volume is settled in US Dollars anymore, and that figure in all likelihood go even lower. No reason to expect that trend to reverse itself and go the other way.
...
As for the Euro, I thought most of European trade between those were done in Euros anyways. They have their currency block.

What is another interesting question for the future is the USD in the oil trade. As we know, China is the world's biggest importer of oil. What if Saudi Arabia for instance accepts RMB as payment? That is not much of a stretch. Venezuela at the moment, would accept anything for their oil, maybe even gold bananas from China, lol.

Being US Dollar free actually can have benefits for some countries in the world. Wasn't Venezuela using blockchain for payments for oil?

Click to expand...

China has had bilateral currency swap agreements with several countries for years. These are renegotiated on a regular basis.

These basically reduce the need to use dollars in international transactions. The don't eliminate it but certainly help. Russia went as far as to completely eliminate the dollar from foreign transactions. They either have bilateral agreements or use the Euro instead.

Back when the JCPOA was under attack by the US government and they wanted to block Iran from using SWIFT I remember the German Finance Minister stating it would be time for the EU to replace SWIFT altogether. Then he was silenced by other people in the German government and the EU. This just demonstrates the weak political power the EU has. Russia has long made their own alternative to both SWIFT and the major debit/credit card companies and China also has done the same and is now moving into digital payments.

cbl21 said:

One thing I worry about is if Moore's law is already nearing its end in the next few years, would seeking to redirect massive amounts of funding into caching up on semiconductors and fabrication equipment be detrimental to China's R&D of the possibly succeeding tech of the future (i.e. quantum computing)?

Click to expand...

The way or ways quantum computing will be used are still work in progress. Most quantum computer designs are still highly experimental and neither portable, nor cheap, nor useful in a practical sense. What is more likely is someone will use make a hybrid between current computing and quantum computing eventually. Regardless investing in one thing does not mean there will be no investment on the other. The Chinese economy is large enough to do both.

hullopilllw said:

Simple, as long as a nation's central bank/authority come into agreement with China to use DCEP as cross border payment, the act will be labelled as endangering US national security and said nation promptly be sanctioned through various means e.g economic/political.

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But how will US know what other nation's central bank is doing? SWIFT is usd centrist so US can lurk around there & because usd is the method of payment they can stop transaction.

I dont see how US will do that unless central banks give direct access to US, which sound very unrealistic.

gelgoog said:

China has had bilateral currency swap agreements with several countries for years. These are renegotiated on a regular basis.

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These basically reduce the need to use dollars in international transactions. The don't eliminate it but certainly help. Russia went as far as to completely eliminate the dollar from foreign transactions. They either have bilateral agreements or use the Euro instead.

Back when the JCPOA was under attack by the US government and they wanted to block Iran from using SWIFT I remember the German Finance Minister stating it would be time for the EU to replace SWIFT altogether. Then he was silenced by other people in the German government and the EU. This just demonstrates the weak political power the EU has. Russia has long made their own alternative to both SWIFT and the major debit/credit card companies and China also has done the same and is now moving into digital payments.

Click to expand...

Well, you should see how the Nord Stream 2 plays out. Navalry's case is US' latest attempt to sabotage Germany-Russia relation, what amazed me is that some German politicians are actually placing themselves in the position of US interest over Germany.