Cashless China

     The total value of cashless transactions in China reached about 16 billion dollars in 2017 and was the highest in the world. Alipay boasts 500 million users, while WeChat Pay may have even 600 million people. The Chinese often use the services of both applications. Together they have over 90%. market share.

 

     For many years, Beijing has been restricting access to its market for foreign competition - Visa or Mastercard. Now, mobile payments are common and Chinese companies have an established position (also the China UnionPay card issuer). Cash payments are becoming problematic. Even the People's Bank of China was concerned, in July it issued a statement that the yuan is an official currency in the PRC and sellers can not refuse to accept cash.

 

    According to the data of the Bank for International Settlements, household debt in relation to GDP increased in China from 17.9%. at the beginning of 2009 to 49.3 percent at the end of the first quarter of 2018. In no other country, the growth rate of household debt was so large. As a result, the statistical Chinese has a higher amount of debt than its annual disposable income.

Suffering of the emerging markets

Investors withdrew from the emerging markets $1.4 billion

 

International Finance Institute (IIF) announced that investors withdrew from the emerging markets $1.3 billion invested in assets and 100 million dollars located in government bonds.

 

The sale of assets and debt securities in emerging markets accelerated last week due to the sharp decline of the Turkish lira and fears related to the global trade war caused by the US imposing duties on export goods from many countries, including China.

 

The strong dollar exchange rate, rising costs of loans and energy also prompted investors to seek safer investments.

 

"Turbulence caused, among others, by increased tensions between the US and Turkey has obviously reduced investors' appetite for emerging economies," the IIF report said.

"Tensions in the market will be most severe for countries that have relatively high demand for external financing," warns IIF.

Most funds were withdrawn from South Africa - $600 million. - and China - $500 million. With a slight delay, i.e. at the beginning of the week, investors' money began to flow away from India as well. 

 

IIF chief economist Robin Brooks said that the value of the Turkish currency is currently lower than its macroeconomic fundamental valuation, and therefore the lira should strengthen in a year to two. He warned, however, that there was a risk of "plague" because capital flows away from other countries classified by investors as a category of emerging markets, such as Argentina, Egypt, Lebanon, Indonesia and South Africa. Poor assessment of the economic situation of several countries in this category often prompts investors to escape from all emerging markets.