Review: Martin Chorzempa’s “The Cashless Revolution” shows why and how China came to be at the forefront of financial technology
The first and last chapters of this book capture the essence of the story and may be sufficient for readers less interested in the blow-by-blow account of the rise and fall of Alibaba’s Jack Ma and Tencent’s Pony Ma . In short, big state-owned banks were run not for the benefit of savers or small borrowers but for the benefit of state-owned enterprises, which enjoyed low-interest loans.
Finally, there is the crucial role of Zhou Xiaochuan, a pro-market reformer who led the People’s Bank of China, the Chinese analog to the Federal Reserve, from 2002 to 2018. Zhou, as Chorzempa puts it, “invited big tech into finance to compete with state-owned banks and force them to shape up, realizing that simply ordering banks to become more innovative was bound to fail.
What does all this mean for the United States? China illustrates how fostering competition can yield innovation and reduce costs to consumers and merchants. But it also shows the dangers of a siloed regulatory system that isn’t equipped to ensure fintech isn’t ripping off consumers, offloading risks on taxpayers, compromising citizens’ privacy or hiding egregious conflicts of interest.
David Wessel is director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. His most recent book is “Only the Rich Can Play: How Washington Works in the New Gilded Age,” the story of opportunity zones.China’s Reinvention of Money and the End of America’s Domination of Finance and Technology
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