To be supervised by the People’s Bank of China, it will be the official platform for the trading of bills of exchange in China’s interbank market, according a PBOC document.When the USA FED system was deployed in 1913, a huge effort was expended trying to get private credit extended between businesses (vendor financing) pulled into the banking system (where it could interest could be applied and also taxed, a double whammy). (Search "bills of exchange" on this page to read the new provision in law that he FED so assiduously attempted to foist on industry.)
With an initial registered capital of 1.85 billion yuan (US$269 million), the platform will allow the first batch of 43 financial institutions, mainly banks, to conduct a trial run from today to February 17, Caixin said earlier.
Financial institutions participating in the platform will need to register the relevant details of the paper bills into the system, and switch the transactions from offline to online, the central bank’s document said.
Bills of exchange, a short-term debt instrument commonly used in financing international trade and small businesses, can be sold among banks at a discount before they mature.
Even when companies pledged receivables against loans, this too (factoring) was in private hands. Now the banks have it. And it gets taxed. Ouch.
The effort failed miserably, for at the time no business was foolish enough to take up the offer to lose money on sales (the discount mentioned in the quote) and in essence make taxation likely as transaction ran through the banks.
Getting businesses to screw themselves failed, but getting end-users, the consumers to do so succeeded wildly. Issuing ex nihilo credit based credit cards did the trick, but not until the 1980s, over sixty years later.
Part of China's spectacular growth and success is when they adopt a USA practice, they can skip all the learning hat took 60 years, and on day one match the USA. China has the ex nihilo consumer credit card system in place, plus the internet and computers to tax immediately and at the most granular level.
When China matches USA, and has the system proofed, they need only back off a few degrees and then China services to the world are preferable to the USA services. And as anyone in the China trade knows, the Chinese can and will always go a penny less than you, for the same thing. Trump calls China beating us at our own game "cheating" and "currency manipulation."
The upshot is the entire system is market-distorting, leading to malinvestment and misalloction since we have goods and services called forth based on ex nihilo credit, not wealth as defined as the range of goods and services called forth by people using their own money to purchase. The Chinese take over of all this will not make the world a better place, except for the fact it will cost a bit less now that the overhead-driven USA economy will lose out.
Of course with free markets we could beat the Chinese, but as a nation there is no interest in free markets. It is down to individuals to trade in a free market mindset in order to avoid the disasters coming. Free markets are always unilateral in action.
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