Washington Insider-- Friday
China's National Digital Currency
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
Group Seeks Supreme Court Review of California's Prop 12
The North American Meat Institute has filed a petition asking the Supreme Court to review an earlier ruling of the U.S. Court of Appeals for the Ninth Circuit regarding the constitutionality of California's Proposition 12 — The Farm Animal Confinement Initiative.
“Prop 12 hurts the family on a budget by causing higher prices for pork, veal and eggs, and unfairly punishes livestock producers outside of California by forcing them to spend millions just to access California markets,” Meat Institute President and CEO Julie Anna Potts said in a release. “If this unconstitutional law is allowed to stand, California will dictate farming practices across the nation.”
The Meat Institute argued the Ninth Circuit's decision conflicts with those of other federal appeals courts regarding whether the constitution limits a state's ability to extend police power beyond its territorial border via a trade barrier dictating production standards.
It also said Prop 12 insulates in-state farmers from out of state competition, while “imposing crushing burdens” on out of state producers with no political voice to shape the rules.
Vilsack Reiterates Changes May Be Made To Food Box Program
USDA Secretary Tom Vilsack Wednesday told a National Press Foundation meeting that he does support the Food Box program deployed by the Trump administration and said that it would run through April, but again said there could be changes to the effort ahead and that no decision to continue it had been made.
A review of the program is underway at USDA, Vilsack said, including that if the program or “something akin to a food box program” were continued, would it be on a smaller, more-targeted scale.
“No decision has been made as to whether or not it will be extended and if extended what it will look like,” he said. He did suggest that one option could be to involve The Emergency Food Assistance Program (TEFAP) as that program has an established distribution system in getting food out to nonprofits and charities.
It still appears that the popular program will continue in some form given the overall concept has won backing of some key lawmakers. However, expectations have been that the effort will be tweaked from its initial version and it could be renamed or as Vilsack suggests, combined with another existing effort such as TEFAP.
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Washington Insider: China's National Digital Currency
The New York Times is reporting this week that China is testing a new digital currency. It described the experience of Annabelle Huang who recently won a government lottery to try China's latest economics experiment.
After joining the lottery through the social media app WeChat, Huang, 28, a business strategist in Shenzhen, received a digital envelope with 200 electronic Chinese yuan, or eCNY, worth around $30. To spend it, she went to a convenience store near her office and picked out some nuts and yogurt. Then she pulled up a QR code for the digital currency from inside her bank app, which the store scanned for payment.
“The journey of how you pay, it's very similar” to that of other Chinese payments apps, Huang said of the eCNY experience, though she added that it wasn't quite as smooth.
China is running a “bold effort” to remake the way that government-backed money works, rolling out its own digital currency with different qualities than cash or digital deposits, the Times says. The country's central bank, which began testing eCNY last year in four cities, recently expanded those trials to bigger cities such as Beijing and Shanghai.
The effort is one of several by central banks around the world to try new forms of digital money that can move faster. Many countries have taken action as cryptocurrencies such as Bitcoin have become more popular.
But while Bitcoin was designed to be decentralized so that no company or government could control it, digital currencies created by central banks give governments more of a financial grip. These currencies can enable some funds to expire if not used by a particular date and can make it easier for governments to track financial transactions, fight tax evasion and crack down on dissidents.
Over the last 12 months, more than 60 countries have experimented with national digital currencies, up from just over 40 a year earlier, according to the Bank for International Settlements. The countries include Sweden, which is conducting real-world trials of a digital krona, and the Bahamas, which has made a digital currency, the Sand Dollar, available to all citizens.
By contrast, the United States has moved slowly and done just basic research. At a New York Times event last week, Treasury Secretary Janet Yellen indicated that might change. She asserted that an American digital currency was “absolutely worth looking at” because it “could result in faster, safer and cheaper transactions.”
Still, no major power is as far along as China. Its early moves could signal where the rest of the world goes with digital currencies, NYT says.
“This is about more than just money,” said Yaya Fanusie, a fellow at the Center on Economic and Financial Power, a think tank, and an author of a recent paper on the Chinese currency. “It's about developing new tools to collect data and leverage that data so that the Chinese economy is more intelligent and based on real-time information.”
While the Chinese government has not said if and when it will officially introduce the eCNY nationwide, several officials have mentioned having it ready for tourists visiting for the 2022 Olympics in Beijing. Recent articles and speeches from officials at the People's Bank of China underscored the project's ambitions and the desire to be first.
The development of a national digital currency began in 2014, when the People's Bank of China set up an internal group to work on one.
People recently have been invited to currency trials through a lottery on WeChat or other apps and were able to click on a link and get a balance of 200 electronic yuan. To spend the money, users can use an eCNY app to scan a retailer's QR code or produce a QR code that the retailer can scan.
The design of eCNY borrows only a few minor technical elements from Bitcoin and does not use the so-called blockchain technology, officials from the People's Bank of China have said.
So far, only a limited number of retailers have taken the currency. But early users said the experience was so similar to Chinese digital payment options like Alipay and WeChat Pay that it would not be hard to switch to it if it were rolled out nationwide.
Eswar Prasad, the former head of the International Monetary Fund's China division, said one of the most important factors driving the eCNY was the success of WeChat Pay and Alipay. Both have given rise to a new alternate financial system that has worried Chinese officials and led to a recent crackdown on Jack Ma, the founder of Alibaba and Ant Financial, which owns Alipay.
If the eCNY is successful, it will give the central bank new powers, including novel types of monetary policy to help the economy grow. Some economists say China's digital currency would also make it easier for the renminbi to compete with the U.S. dollar as a global currency. But Chinese officials and analysts have said many other changes would be necessary for that to happen.
So, we will see. So far, the prototype currencies often appear to be highly intrusive and the idea of basic new shifts in the nature of national currencies is deeply daunting. Such proposals should be watched closely by producers as they are debated and, perhaps, implemented, Washington Insider believes.
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