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CommentJanuary 2 2020

The world watches as China's paytechs march on

China’s payment technology giants have the country’s long reach into Belt and Road countries to help them expand, benefiting the unbanked in emerging markets but making Western politicians uneasy. 
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The global expansion of China’s payments technology giants has been swift. From India to Nigeria, these organisations are now embedded across many of the world’s fastest growing markets.

This is a good thing. The provision of financial services – and the technology that underpins it – is sorely needed in many emerging economies. Today, Chinese firms are best placed to answer this challenge, thanks to a retail payments revolution that has unfolded in their home market over the past 10 years.

No other fintech groups have the capability to deploy their platforms and expertise at scale, globally – and with the cost efficiency – of China’s payments titans. In the coming years, the benefits for consumers in Lagos, Cairo or Lahore will be vast, particularly as cross-border payments become cheaper and easier to execute. 

But these benefits will not come without a cost. An escalating technology cold war between the US and China, which started in the realm of telecoms, is spreading quickly. In December 2019, the Chinese government ordered all foreign software and computer equipment be removed from public institutions inside the next three years.

And there is every chance that payments technology, and the platforms it supports, could end up in the crosshairs of this conflict. Already, a niche group of Western policy-makers are looking at China’s progress in the payments space with apprehension. The impending launch of a digital renminbi, the world’s first state-backed digital currency, is unlikely to ease these concerns. 

Backed by by world-beating payments technology and a successful digital renminbi, it is easy to see the ways in which Beijing could carve out a sphere of monetary influence, particularly among emerging markets in its Belt and Road Initiative. But even if this scenario proves to be true, it would not be exceptional. Throughout history, every great power has pursued similar objectives. And as the world moves towards a multipolar global economy, a more diversified international and monetary financial system may be no bad thing.

For now, the ways in which these dynamics play out will rest on the shoulders of politicians in both the East and the West. One can only hope that they place the economic empowerment and wellbeing of individuals before their strategic rivalries.

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