Compiled by: Golden Finance
On September 28, 2024, Zhu Guangyao, former vice minister of the Ministry of Finance of China, said at the 2024 Tsinghua PBC Chief Economist Forum that the digital economy has a special asset, "cryptocurrency". In the past decade, the United States generally believes that cryptocurrency has huge destructive power and market risks. However, the encryption policy of the United States has undergone a fundamental change since 2024, and China needs to study the latest changes and policy adjustments in the international community. Zhu Guangyao bluntly stated that "the current gap between China and the United States in cryptocurrency is that China does not participate", and called for facing the problems and solving them in regulation.
On September 29, 2024, Golden Finance first reported the news, which caused a huge response. Golden Finance has now compiled Zhu Guangyao's speech based on the video of the roundtable discussion on "Industrial Transformation and Economic Outlook".
The following is the transcript of Zhu Guangyao's speech during the round-table discussion (subheadings are added by the editor):
The general trend of digital economy is the fourth industrial revolution, and China is in the first echelon
The current development of the digital economy can be said to be leading the overall trends and movements of global development.
With the breakthrough of AI technology this year, I think we have entered the fourth industrial revolution, or the fourth industrial revolution has begun. Compared with the past three industrial revolutions, China is indeed different this time. We are in the first team and the first echelon, or the United States and China are now leading the development of the digital economy. Of course, we must admit the gap between China and the United States, that is, from 0 to 1, the United States is indeed still playing a leading role. However, China has the largest application scenario of the digital economy, and we have indeed accumulated a relatively strong foundation in some innovative fields, talent training and technical experts.
Recently, former European Central Bank President Draghi presided over the EU's research report on digital economy productivity competition. He clearly stated that there is a gap between the EU and the United States and China. Therefore, Europe must increase huge investments to catch up.
Judging from the overall development trend of the digital economy, the next ten years can be said to be the fourth industrial revolution, which will proceed maturely.
A key area of the digital economy is submarine optical cables
The infrastructure of the digital economy. At the front end, it is the mobile phone that each of us uses, which is our platform. At the back end, the key infrastructure is the data center, which is the optical cable that ensures the operation of the network. Intercontinental optical cables are crucial. In the context of globalization, more than 99% of intercontinental data now operates through submarine optical cables. Among the 20 largest supercomputing centers in the world, China has 3, the United States has 17, Europe has none, and Japan has none. The United States is leading in this regard.
So, we are now in the first echelon. It is true that under the guidance of the new development concept and the innovative theory of "innovation, coordination, greenness, openness and sharing", we have achieved tremendous results since the 18th National Congress of the Communist Party of China.
But we are now facing challenges. The United States passed the (Clean Network Plan) under the auspices of the Trump administration in 2020, and it is still being implemented. A key area is submarine optical cables. Chinese companies have huge engineering and construction capabilities, but now the US government is trying every means to force American companies not to cooperate with China.
The United Nations has clear data that 49% of global data is exchanged in the United States, 24% in Europe, 22% in East Asia, and 9% in China. However, if the intercontinental network is cut off, that is, the United States and China are decoupled, then the loss to the United States will be reduced by 12%, that is, from 49% to 37%, while China will drop from 9% to 7%, which is a huge loss for both sides.
The fourth industrial revolution in the next decade will be driven by artificial intelligence. The most dangerous thing is that due to the impact of this decoupling, two parallel markets and two parallel supply chains, the International Monetary Fund estimates that the loss is 7%-12% of the global economic output of 105 trillion, that is, 7 trillion to 12 trillion. Therefore, no country can bear such a huge economic loss alone, and it is extremely dangerous. Therefore, we must return to this globalization process, and the important economic policies of major economies must be closely communicated.
Cryptocurrency: A fundamental shift in US policy
On the other hand, the digital economy now has a special asset - cryptocurrency.
Over the past decade, the United States has unanimously agreed that cryptocurrency: 1. It has a huge destructive effect on international anti-money laundering and international anti-terrorist financing. 2. It has huge market risks because the sharp fluctuations in its value have a huge impact on the international financial market.
However, this year has seen a significant evolution in U.S. (crypto) policy.
1. The Republican Party platform clearly lists the development of cryptocurrency as its campaign platform. At the same time, it also clearly states that China must be excluded. Trump also publicly said during the campaign that the United States must embrace cryptocurrency and deny that China will replace the United States. His vice presidential candidate Vance is a venture capitalist himself and holds a large amount of cryptocurrency assets.
Second, the executive branch. Trump said that he would fire the current SEC chairman who is restricting the development of digital currencies on his first day in office. But now the SEC chairman approved 11 Bitcoin ETFs to be listed on the New York Stock Exchange and Nasdaq in January this year. This marks that the US government recognizes the legitimacy of Bitcoin. In July, it approved the listing of the Ethereum ETF.
Therefore, even the current U.S. SEC, which has been accused by Trump of implementing various policy restrictions on the development of Bitcoin, and the attitude of the entire Biden administration have actually undergone a fundamental change.
In the emerging market BRICS countries, Russian President Putin officially approved cryptocurrency in September 2024. South Africa, Brazil, and India have actually been doing it before.
So, when it comes to the development of digital currency, cryptocurrency does have negative effects, and we must fully recognize its risks and harm to the capital market. However, we must study the latest changes and policy adjustments internationally, especially the impact of the U.S. bipartisan policies, because it is a crucial aspect to the development of the entire digital economy.
How China responds
Moderator: Thank you, Minister Zhu. Let's recall that before 2015, when it was called mining, China's digital currency technology was leading the world. Now nine years have passed, how far do you think we are behind?
Zhu Guangyao: Mining is actually closely related to the development of chips.
What are we worried about? It is what I just said, that anti-terrorist financing and anti-money laundering are severely impacted by cryptocurrencies, especially the sharp fluctuations in the capital market. This is what the Americans and we have repeatedly insisted on saying at the G20.
Does cryptocurrency have these hazards? Yes. But how can we solve the problem in terms of regulation? It should be solvable. The gap we have now is that even if you don’t participate, transactions can still be made through underground channels. However, you don’t have the ability to use production because you are prohibited by law.
Therefore, we have to study new problems. According to a communiqué of the Central Political Bureau meeting, we must face the problems, discuss them, and solve them.
