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China to win the currency war following the U.S.-China trade war

[ Economist's Deconomy ] Fnancial historian Niall Ferguson is one of the people who believes China will win the competition for hegemony against the United States. Ferguson wrote in the Wall Street Journal that now is the transition period making the end of the West’s dominance, which has persisted for the past 500 years, and that the United States does not have the power to resist the fall. Ferguson points out that the revolution of the mobile and internet in the 21st century is the outcome of the Silicon Valley’s success. He argues that big tech firms like Facebook, Amazon, Apple, Netflix, Google and Microsoft have gained the dominance in each of the fields, but China is standing against their dominance. China’s strategy has been to develop the local businesses after limiting the access of the U.S. IT firms into China at all costs. China kicked U.S. IT firms that do not abide by the Chinese government’s regulations out of the country. Facebook was shut down in China in 2009, while Google withdrew from the country in 2010. Over the past 10 years, Baidu, Alibaba and Tencent became the dominant firms in the country in the fields of search engine, e-commerce and social network, respectively. They are now likely the only firms in the world to be able to confront the companies based in Silicon Valley. Describing the phenomenon as the Great Wall of China, Ferguson positively evaluated China’s strategy to develop the country’s internet market, calling it a smart move in terms of economy and politics. The potential is likely to be enormous when the network of China’s big tech companies and that of Xi Jinping’s communist network are connected. China has already established the systems to register household and personal information, which are seen as a social system that is more powerful than what was seen in the mid-20th century under Nazi Germany, Stalin’s Russia and Mao Zedong’s China. Ferguson also predicted the possibility of China issuing cryptocurrency. China is seen to be well aware of the potential of blockchain-based cryptocurrency, and is likely working on it. It will probably be called the Bityuan. China will be confronting the United States across fields, from trade to finance and military. China is predicted to establish its own blockchain issuance system as part of its effort to stay ahead of U.S. finance. Following Facebook’s Libra push, China announced its plan for the Central Bank Digital Currency. Ferguson’s insight is impressive, seeing the U.S. government’s negative view on adopting Libra, which has caused the delay in the launch of the virtual currency. According to his prediction, Beijing is very likely to beat Washington in the ongoing hegemonic competition. If China successfully launches its own cryptocurrency, it marks the beginning of the new era in the history of currency, challenging the reputation of the U.S. dollar. China has already surpassed the United States in terms of trade. United States so far is holding onto its dominance in fields of finance and military. But when China adopts the centralized cryptocurrency and the Bityuan becomes the main currency used for trade centering on China, the gap between China and the United States will rapidly diminish in the field of finance. How will the hegemonic fight between the United States and China end? Referencing Britain, which was rapidly overcome in the early 20th century by the emergence of Germany, Ferguson advised the United States to establish a partnership with China. But the United States is unlikely to accept China as a partner, and the currency war between the two has emerged followed by their trade war. Kyobo Securities Co. Lim Dongmin Economist

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