China invented paper currency more than 1,000 years ago. More recently it has led the world in electronic payments, thanks to the vision of Alibaba and Tencent in building the Alipay and WeChat Pay platforms. Now it’s about to steal a march on the rest of the world – notably the US – by creating the first digital currency controlled by a central bank (as distinct from cryptocurrencies such as Bitcoin, which exist outside the traditional global financial system and aren’t legal tender). “Digitised money could reorder the fundamentals of finance the way Amazon disrupted retailing and Uber rattled taxi systems,” says The Wall Street Journal.
In tests in recent months, more than 100,000 people in China have downloaded a mobile app from the central bank that enables them to spend small government handouts of digital cash with merchants. Digital yuan appear on a screen with a silhouette of Mao Zedong, looking just like paper money.
Some see this as a way for Beijing to strengthen its centralised grip on power, with sinister consequences (the ability to track people’s spending in real time) and more benign effects (the speeding of relief to disaster victims or the flagging of criminal activity). A wider concern is whether the digital yuan could one day allow China and its allies to bypass US sanctions enforced against countries such as North Korea and Myanmar, as well as more than 250 Chinese named on the Specially Designated Nationals and Blocked Persons List, through the age-old practice of freezing of dollar assets.
“The digital yuan could give those the US seeks to penalise a way to exchange money without US knowledge,” says the WSJ. “The chance to weaken the power of American sanctions is central to Beijing’s marketing of the digital yuan and to its efforts to internationalise the yuan more generally”.
Spot on, says Bloomberg columnist Niall Ferguson, who highlights the virtues of digital currency and takes US policymakers to task for their lack of foresight. The American monetary authorities are “underestimating the threat posed to dollar dominance by China’s pioneering combination of digital currency and electronic payments”. And by seeking to limit cryptocurrencies or ban them, they are “treating the blockchain-based financial innovations that offer the best alternative to China’s e-yuan like gatecrashers at their own exclusive party”.
Buyouts could be big in Japan
Are we about to see Japan’s biggest-ever leveraged buyout deal – and one of the largest anywhere for more than a decade? We might be, following reports that CVC Capital Partners has made a $20bn offer for Toshiba.
Removing the 145-year-old company from the Tokyo Stock Exchange in a foreign-led deal would be “a hugely symbolic move”, says the FT. American private equity firms such as Bain and KKR view Japan as “one of the most target-rich markets in the world”. Toshiba has been especially vulnerable because of a profit-padding scandal in 2015, its near bankruptcy two years later – stemming from the collapse of its US nuclear business – and a humiliating defeat in a showdown with shareholders last month.
If approved, CVC’s move will be one of the largest leveraged buyouts since the 2008 financial crisis, on the same scale as the €17.2bn acquisition of ThyssenKrupp’s lifts business by Advent International and Cinven.
Chad tidings we bring
Forbes’s annual billionaire list is always a treasure trove for voyeurs of the rich. Donald Trump has fallen nearly 300 places in this year’s rankings – a “humiliating” drop, says The Guardian – while Britain’s richest man, James Ratcliffe, founder, chairman and majority owner of the chemical company Ineos Group, climbed five places to No 113th, with a fortune of $17bn.
But have you heard of Chad Richison, founder and CEO of payroll processor Paycom Software? The Wall Street Journal has declared him the highest-paid CEO in the S&P 500 “based on disclosures so far”? Richison’s package includes an award of restricted shares that could add more than $2bn to his fortune over the next decade if the company’s share price more than doubles in this period.