China and the Blockchain
The relationship between the Chinese government and cryptocurrencies can be described as “bitter sweet”. The nation’s government has been on a persistent attack against the currencies’ tendency to fuel financial risk, and the government may also feel threatened by crypto’s threat to its vise-like grip over the country’s monetary system.
At one point, the Chinese crypto exchange market accounted for around 95 percent of global bitcoin trading. However, matters gradually shifted starting February 2017, when government officials began regulating currency trading, declaring bitcoin would never be treated as a legal tender. The effect was felt far and wide throughout the markets, and exchanges picked up stakes and decamped to nearby crypto-friendly countries like Taiwan and Japan.
While the official stance on crypto remains skeptical, China has dipped more than a toe or two into the blockchain waters, with none other than Xi Jinping calling the technology a “breakthrough”. With an eye to the potential applications of the new technology, the government has unveiled a three-year action plan to address gaps in the present IT sector’s application in the economy, including fintech projects, blockchain algorithms, and other related entities.
Blockchain Project Plans Unveiled
The plan is a joint project by the Chinese National development Commission (NDC) and the Ministry of Industry and Information Technology (MIIT). According to MIIT, “At present, China’s economy has shifted from a high-speed growth stage to a high-quality development stage. Along with the continuous improvement of the income level of residents and the profound changes in the consumption structure, the total consumption demand in China has rapidly increased, and the structure has continuously moved to the high end, and the fundamental role of economic development has become increasingly prominent.”
The statement comes as welcome news to fintech and blockchain enthusiasts in the country, many of whom believe it signifies the Government’s seriousness regarding blockchain implementation in the near future.
Implications of the Action Plan
The action plan falls under a broader initiative by the country’s National Congress that focuses on improving domestic consumption. According to official reports, the government is said to have targeted a $46.5 billion consumption level for IT related services, with a sustained annual growth of 11% by the year 2020. The plan’s fruition would result in improvement in 4 key areas — IT infrastructure, the IT business environment, information services, and consumption willingness. The report also indicates plans for both private and institutional consumption using internet of things services, as well as other related technologies.
According to a statement in the joint report addressing China’s Information Consumer Group, the plan “has effectively promoted the deep integration and innovation of the new generation of information technology and economic and social fields, and promoted the digital transformation of traditional industries and expanded the digital economy”. The report goes on to say that the plan to increase consumption is also faced with obstacles like “high-end and effective supply shortage”, the fact that “consumption potential of some regions has not been fully released”, and optimization needs of “the consumption environment”.
The project is aimed at the rapidly increasing information consumer group in the People’s Republic of China. With the consumption concept of the general public also increasing, the government hopes to tap into the hidden potential of blockchain based fintech projects. Other blockchain and fintech related projects in the country include the Bank of China’s blockchain technological research, which is expected to increase China’s research and development allocation by a sizeable amount.
With a push for blockchain technology coming from different vectors in the Chinese government and banking system, the country promises to be the first major power to integrate the new technology into its day to day operations.