Archive for ‘MasterCard’

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30/08/2019

Is China set to beat Facebook’s Libra by launching its digital currency this autumn?

  • ‘Forbes’ magazine reported that China’s central bank will launch its own sovereign digital currency to coincide with the Singles’ Day online shopping festival
  • The People’s Bank of China is seeking to address financial risks and counter the current dominance of the US dollar
The Singles' Day is a holiday celebrated in China on November 11 and has become the largest online shopping day in the world. Photo: Simon Song
The Singles’ Day is a holiday celebrated in China on November 11 and has become the largest online shopping day in the world. Photo: Simon Song

China’s desire to launch the world’s first government-backed digital currency could see the possible rival to Facebook’s Libra be launched in time for November’s Singles’ Day online shopping festival despite a Chinese media report playing down the timing as “inaccurate speculation”.

Several central bank officials have publicly spoken out over the past several weeks about the need for China to launch its own digital currency since Facebook unveiled its plans for Libra, and the People’s Bank of China (PBOC) appear to be making rapid progress ahead of an expected launch.

Forbes magazine reported this week, citing a source who previously worked for the Chinese government, that China’s central bank could launch the digital currency as soon as November 11 as its bids to address financial risks and to counter the current dominance of the US dollar.

The PBOC did not respond to a faxed request for comment on the Forbes story, although Sina.com said that the report was “inaccurate speculation” citing an unnamed source close to the central bank.

China’s central bank is expected to distribute its digital currency through the big four state-owned banks – the Industrial and Commercial Bank of China, China Construction Bank, the Agricultural Bank of China, and the Bank of China – and mobile payments systems Alipay and WeChat Pay, as well as UnionPay, the state-supported credit card provider, according to the Forbes report. Alibaba is the owner of the South China Morning Post.
Ma Changchun, deputy chief of the Payment and Settlement Division of the PBOC, said at the start of August that a digital currency prototype existed and that the central banks’ Digital Money Research Group had already fully adopted blockchain architecture to ensure its use in retail transactions.

“The People’s Bank digital currency can now be said to be ready,” said Ma on August 11.

The People’s Bank digital currency can now be said to be ready Ma Changchun
Former central bank governor Zhou Xiaochuan said last month that, in addition to central banks, “commercial entities” should be allowed to issue banknotes backed by their own private currency assets, although he did not elaborate on what kind of “commercial entities” might be appropriate to issue a digital currency in China.

China is also ready to make Shenzhen a pilot zone for digital currency as part of plans for the city to become a socialist model city, according to a statement summarising a meeting between the Shenzhen party secretary Wang Weizhong and central bank governor Yi Gang released on Thursday.

The PBOC implemented a blanket crackdown in China on trading of cryptocurrency, including bitcoin, which are not backed by any government, viewing them as risks to China’s financial stability and security. At the same time, in 2014 the central bank created its own academy to study digital currencies and the related blockchain technology.

Neil Woodfine, director of marketing at blockchain start-up Blockstream, said a digital currency created by the PBOC would be “just like cash” and “would be fully controlled by the central bank.”

“If it’s digital instead of physical, they can close accounts and monitor all activities [in the entire financial system]. Commercial bank deposits are difficult for them to monitor, control or pull information out of for verification because the numbers are in each bank’s data centre,” Woodfine said.

Wang Xin, director of the central bank’s research bureau, said last month that

Facebook’s plans 

to create its own digital currency have pushed Beijing to speed up its own digital currency plan as Libra could potentially pose a challenge to Chinese cross-border payments, monetary policy and even financial sovereignty.

Leonhard Weese, the president of the Bitcoin Association of Hong Kong, said that a government-backed digital currency may enhance the PBOC’s control of China’s monetary system, cutting reliance on commercial banks to transmit changes in monetary policy.
“It would be similar to just killing the commercial banks,” Weese said.
Facebook’s Libra,

which would be a non-sovereign digital currency controlled by a Swiss-based company, has come under intense scrutiny by regulators and central banks worldwide. Last month, the Group of Seven industrialised nations, known as the G7, called for urgent regulatory measures and other types of action to address serious concerns over Libra.

Central banks, however, have expressed interest in launching their own digital currencies to counter the US dollar and to gain more control of their own monetary systems.
Mark Carney, governor of the Bank of England, argued last week that the US dollar, the current dominant reserve currency, could be replaced by a global digital alternative to tackle ultra-low interest rates.
Facebook’s Libra, which is expected to be launched next year, will be pegged to a basket of convertible currencies – so it could serve as a stable online currency – while its payments will be endorsed by Visa and Mastercard. Photo: Reuters
Facebook’s Libra, which is expected to be launched next year, will be pegged to a basket of convertible currencies – so it could serve as a stable online currency – while its payments will be endorsed by Visa and Mastercard. Photo: Reuters

A digital currency “could dampen the domineering influence of the US dollar on global trade”, Carney said last week at the US Federal Reserve’s annual conference, adding that a digital currency has the edge to counter shocks emanating from the US through trade and exchange rates.

Daniel Wang, chief executive and co-founder of blockchain start-up Loopring, said that a Chinese government-backed digital currency may provide a new way for the yuan to compete globally.

“If the central bank wants to increase the global competitiveness of the yuan through its digital currency, only an open and standard-based competitor carries any hope,” said Wang.

A digital yuan would “remain a sovereign currency under a centralised sovereign,” continuing to require the trust from users in the Chinese central bank and government institutions behind it, Wang added.

Alfred Schipke, senior resident representative for China at the International Monetary Fund (IMF), said that the bank is “open” to digital currencies, including the one being developed by China’s central bank.

The IMF in principle is looking at these things favourably. It’s a two-way process where we learn from China, which is often at the forefront of development. Alfred Schipke

“We don’t have a specific view on a particular currency, we haven’t looked at the details of the latest proposals from China,” Schipke said on Thursday. “The IMF in principle is looking at these things favourably. It’s a two-way process where we learn from China, which is often at the forefront of development.”
Blockstream’s Woodfine said that Beijing’s move also reflects a growing concerns among central banks that a financial disaster is on the horizon.
The 30-year US Treasury bond yield fell to an all-time low 1.976 per cent on Thursday, while yields around the world also plunged to multi-year or record low, triggering rising fears over a global recession.
Central banks around have also been driving down interest rates, with the PBOC recently unveiling a key interest rate reform that effectively cuts borrowing costs for companies to boost its slowing economy.
“We’ll see a move by governments and central banks to take back control over the financial system and use that power to direct their economies, continuing to pump money into the system to keep it afloat,” Woodfine added.
“A digital currency would be the perfect channel for helicopter money,” he said in reference to the idea that a central bank could stimulate the economy by giving out large quantities of money to the public, as if dumped from the sky. “They can send out free money to consumers.”
Source: SCMP

Posted in Agricultural Bank of China, Alibaba, Alipay, autumn, Bank of China, Bank of England, Bitcoin, Bitcoin Association of Hong Kong, blockchain architecture, blockchain technology, Blockstream, Central bank, China alert, China Construction Bank, Commercial bank deposits, cross-border payments, cryptocurrency, digital currency, Digital Money Research Group, Facebook, Facebook’s Libra, financial sovereignty, Forbes, Forbes magazine, G7, governor, Group of Seven industrialised nations, Industrial and Commercial Bank of China (ICBC), International Monetary Fund (IMF), launching, Libra, Loopring, Mark Carney, MasterCard, Monetary policy, Payment and Settlement Division, PBOC, People’s Bank of China (PBOC), pilot zone, Reserve currency, Shenzhen, Sina.com, Singles Day, south china morning post, sovereign digital currency, Swiss-based company, to beat, Uncategorized, UnionPay, US dpllar, US Federal Reserve, US Treasury bond, verification, Visa, WeChat Pay | Leave a Comment »

19/05/2019

Modi’s jobs deficit: J&J’s largest India plant idle three years after completion

ENJERLA/NEW DELHI, India (Reuters) – It was supposed to be Johnson & Johnson’s biggest manufacturing plant in India. It was to eventually employ at least 1,500 people and help bring development to a rural area near Hyderabad in southern India.

Yet, three years after the U.S. healthcare company completed construction of production facilities for cosmetics and baby products on the 47-acre site, they stand idle.

Two sources familiar with J&J’s operations in India and one state government official told Reuters production at the plant, at Penjerla in Telangana state, never began because of a slowing in the growth in demand for the products.

One of them said that demand didn’t rise as expected because of two shock policy moves by Prime Minister Narendra Modi: a late 2016 ban on then circulating high-value currency notes, and the nationwide introduction of a goods and services tax (GST) in 2017.

J&J spokespeople in its Mumbai operations in India and at its global headquarters in New Brunswick, New Jersey, declined to respond to a list of questions from Reuters.

Modi’s office did not respond to a call and an email with questions.

Aimed at rooting out corruption and streamlining the tax system, the double whammy of ‘demonetization’ and GST – were two of Modi’s signature policy moves. But instead of encouraging economic activity as intended, they did the opposite, at least in 2016-2018, by sapping consumer demand, according to some economists.

Many businesses, especially small and medium-sized enterprises, complained publicly – some in their financial statements – that they suffered a drop off in orders. The suspended J&J project stands as one of the most vivid examples of the impact on the broader investment picture.

In the first month after demonetization, some business surveys showed that sales of products such as shampoos and soap fell more than 20 percent.

Lack of jobs growth and a farm-income crisis because of low crop prices have hurt Modi in the current general election, according to several political strategists.

Still, Modi and his ruling Hindu nationalist Bharatiya Janata Party are expected by many of the strategists to be in a position to get a second term – probably with support of some other parties – when votes are counted on Thursday, partly because of his strong stance on national security issues.

BIG INVESTMENTS, GREAT EXPECTATIONS

A range of Modi’s business policies, such as capping prices of medical devices, forcing tech companies to store more data locally and stricter e-commerce regulations have in the past two years hurt plans of American multinationals such as J&J, Mastercard, Amazon and Walmart-owned Flipkart.

The groundbreaking of the J&J facility in Penjerla, its third in the country, was carried out with much fanfare in 2014, attended by Telangana state’s Chief Minister Chandrashekar Rao, who hailed the foreign investment as a big win for local communities. A document dated April 2017 that lists products the company planned to make at the facility, submitted to the Telangana government and reviewed by Reuters, names baby oil, baby shampoo, baby lotion, baby hair oil, face wash and creams.

Shaukat Ali, running a tea shop under a bamboo stall on barren land outside the plant, said local workers check in routinely for possible vacancies at the J&J site, but nothing has come up in years.

At the local pollution control board office, the member secretary Satyanarayana Reddy said the J&J plant had all the required approvals and he was not sure why it hadn’t started production.

“It is unusual for such a big plant to stay idle for so long,” he said. “But there is no problem from our side.”

Chandrasekhar Babu, an additional director at the Telangana industries department, said a J&J company official told him the plant hadn’t started due to lack of demand.

GST and demonetization were two key reasons the plan didn’t kick off, one of the sources said, adding that lack of consumer demand since then dented company’s plans.

The second source familiar with J&J’s plans said the company miscalculated Indian market demand.

On a recent visit by a Reuters reporter to the J&J plant, plush, furnished conference rooms and cubicles sat inactive; M. Sairam, who said he was the site manager, told Reuters production areas with machines were idle too.

PLANNED FURTHER EXPANSION

Local officials had hoped the initial J&J plant would be only the beginning. After the groundbreaking in 2014, Pradeep Chandra, who was Telangana’s special chief secretary of industries, told Business Today magazine that “based on the extent of land (J&J) have acquired we believe that they are looking at much larger expansion here.”

Local media reports at the time said the J&J facility would employ some 1,500 people.

A J&J official, who was not identified by name, was reported subsequently in December 2016 in India’s Business Standard assaying that the $85 million plant would be operational by 2018 after it had overcome procedural delays. The official was quoted as saying the company had earmarked an additional $100 million for expansion.

Vikas Srivastava, the managing director of J&J Consumer(India), who was at the 2014 groundbreaking, did not respond to calls for comment.

Reuters also talked to two workers outside a sprawling Procter & Gamble facility making detergents and diapers, which is next to the J&J plant. They said they were part of the P&G plant’s production team and the plant had been running below capacity.

A P&G spokesperson denied that, saying the plant was “operating at full capacity in line with our business plans”. “India is a priority market for P&G globally and in recent quarters, P&G’s business in India has registered strong double-digit growth consistently,” the company said.

The weak rural economy, where most Indians work, has also hurt growth in sales of basic items such as detergents and shampoo in the past year.

Hindustan Unilever Ltd, an industry bellwether that would compete with the likes of J&J and P&G in some categories, said its volume growth shrank to 7 percent in the quarter ended March 31, down from double-digit growth in the previous five quarters.

The company warned that the daily consumer goods segment in India was “recession resistant … not recession proof.”

Source: Reuters

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