Is China the Promised Land for Blockchain

The European Union Chamber of Commerce in China celebrated its 20th anniversary this year, which has given us a chance to look back and see what has changed in China’s business environment and where we have successfully moved the needle. However, while the Chamber has established itself as a reliable and fact-based business organisation, and can point to a number of significant, tangible achievements over the years, it is imperative that we keep looking towards the future and evaluate where we can continue to contribute to China’s development.

European Chamber President Jörg Wuttke

This issue of EURObiz looks at one of the technological developments that could shape the societies of tomorrow. Since the birth of the Internet, there have been few more promising global catalysts for innovation and efficiency than blockchain technology. Still, there is a cloud of mystery surrounding the concept among people that do not deal with technological theories on a day-to-day basis. This issue of EURObiz aims to shed light on it.

One of the most referred-to aspects of blockchain is the trading and management of cryptocurrencies such as Bitcoin. However, the possibilities for application in business operations and payment processes are far more widespread than this alone. Blockchain can also be implemented as a safe mechanism for data sharing, and stimulate efficiency in business operations and supply chain management. As you will read in this issue, some private Chinese technology companies are already using it to track goods along each stage of the supply chain to the end user, which could help in supervising, as well as locating and solving quality issues.

However, one of the most anticipated developments regarding the use of blockchain technology remains the creation of a Chinese digital currency. In theory, a digital currency based on blockchain technology can better facilitate digital transactions and could potentially be used to securely track where money is being spent. It could go as far as play a role in the internationalisation of the renminbi, particularly with traceability being one of the key issues holding China back from full liberalisation. It is not yet apparent if digitalisation would indeed see it fully internationalise its currency, but the appeal of the technology in this field is understandable.

As with all new, high technology sectors, the race for global blockchain supremacy is being fiercely competed, with China emerging as one of the main contenders. President Xi Jinping prioritised the development of blockchain when he labelled it a core technology in China’s national strategy in October 2019, and Chinese companies are currently being pushed to introduce initiatives based on blockchain technology in their respective sectors.

While the European Chamber has been critical of such top-down industrial policies in the past—as seen with China Manufacturing 2025—due to the way such schemes can distort markets, and result in overcapacity and a severe misallocation of resources, this kind of focussed approach could see China edge ahead in this crucial phase of development of a digital economy based on blockchain. Europe needs to pay close attention and should even look into devising a coordinated response, lest its companies find themselves falling behind in an area of technology that becomes the backbone for how business is conducted in the future.