Alibaba’s “Cashless Week” Rankles China’s Central Bank
Recently, Alibaba’s financial arm, Ant Financial, decided that it would be a good promotional opportunity to point out how comparatively simple it is to live without cash thanks to mobile payment systems like Alipay. That’s a move that wasn’t well-received by one unlikely source: the People’s Bank of China, the Chinese central bank, which has the authority to issue currency in the country. It expressed some serious concerns about the notion that a corporation could effectively declare its efforts obsolete.
Alipay’s first annual “Cashless Week” promotion drew the most attention from the People’s Bank, though that event recently ended. A second measure, a move that calls on the merchants in five major cities—Fuzhou, Guiyang, Hangzhou, Tianjin and Wuha—to accept Alipay in stores by the end of the year is even more worrisome to the bank.
The bank’s primary worry is that Ant Financial is using its massive market clout to effectively render the standard yuan largely useless. Not as a unit of currency, but rather as a piece of paper stored in wallets, pockets, and most anywhere else. The bank noted recently that such efforts “…have interfered with the normal currency flow of the yuan”, which in turn “…has had a relatively big impact on society and created misunderstandings among the public.”
Alipay definitely has the market clout to issue such statements; after all, it’s got over half a billion total users and has been making inroads into countries the world over, expanding its value to the Chinese tourist class. The notion that it could be so big it effectively replaces the national bank isn’t out of line.
Given reports that around 14 percent of China’s population is currently cashless by choice, that does mean a demand for a whole lot less paper cash than was previously needed. Moreover, a generation gap effect is kicking in; a person in their fifties going out takes around $83 with them, on average. A person in their twenties going out takes about $26.
The People’s Bank has a tough challenge here; does it crack down on a product people clearly want and risk uprisings, or does it allow itself to become obsolete by the people’s indirect decree? Neither answer is a good one, but it’s a point it will have to deal with soon enough.