Wan Lik Hang

China News 23rd August 2021

Our news this week shows some excellent photographs from a new book about China.  Then there is a critique of the new 5G service from Huawei that might be of interest to other 5G users and potential users.  Finally, we have a brief discussion about the possibilities of the RMB replacing the role of the US dollar.  

New book

I want to introduce to you a book that charts China’s development and changes in the past 100 years.  For example, 100 years ago, China did not have a self-designed modern bridge.  100 years later, China became the world’s largest builder of bridges. There are more than 800,000 highway bridges alone.

The first bridge of Beipanjiang on Hangzhou-Ruizhou Expressway is the world’s tallest bridge

IC

Gansu Dunhuang 100MW molten salt tower photothermal power station.

Longyangxia Hydropower Station

5G experience

At present, there are many people who have bought 5G mobile phones and 5G packages but turned off the 5G network. Some mobile phone dealers told us that they would turn off the 5G network because of “power consumption and traffic”.  Some digital bloggers said that they “only opened the 5G network on the day he got the 5G phone”.

Consumers dislike 5G networks mainly because of more power consumption and higher traffic. With 5G network on, users’ time on mobile phones has decreased significantly, but the traffic consumption has increase

Our writer was told that most of the power consumption is due to higher 5G frequency bands and greater overall traffic. In addition, the construction of 5G network is still in the early stage, and users will encounter the problem of network discontinuity.  If the 5G network has no signal, the phone will automatically switch to 4G, and then switch back, which will consume more power.

In fact, users encountered similar resistance when 3G upgraded to 4G, when some people even joked that “the daily traffic fee consumes one month’s salary”. However, if you compare the unit cost of traffic, 5G network is far lower than 4G. Therefore, the unit price of the operator will also be lower for consumers.

Specifically:

The cost of 5G base stations may be 130%-150% of 4G, but the traffic that can be carried is 10 times that of 4G. In this way, the unit flow cost is much less.

For example, consumers use numbers as 30%-50% more traffic than 4G, but the fees paid increased by 10%. In the future, with the decline of 5G tariffs, traffic will be cheaper.  To use a metaphor, 5G network is a wider road than 4G network.

However, although many users have bought 5G mobile phones and opened 5G packages, they manually switch to 4G networks. This is the biggest headache for operators.” 5G network has been built, but the utilization rate is not high, and then it will cost a lot of money to maintain the network.

On the other hand, 4G networks are already very crowded. Consumers continue to report that 4G speed declines and suspect that operators are actively limiting speeds. The Ministry of Industry and Information Technology also replied:

The growth of 4G user traffic and the improvement of network support capacity are not exactly matched.

Operators no longer invest in 4G base stations, but the 4G traffic is still growing, and the speed naturally decreases.

By the end of 2020, according to the financial reports of the three major operators in China, the total capital expenditure of the three companies on 5G will exceed 180 billion yuan. Some consumers believe that such high costs have been partially transferred to consumers.

In addition to more traffic, other 5G advantages exist:

For example, in railway stations and stadiums, where people are very crowded, 4G networks cannot cope, but the throughput of 5G networks is many times higher than 4G. 

crowd, train station, China
Asian Development Bank

There are too few people using it now, and the investment must be lost. When the 5G network is widely used and the average operating cost is reduced, the 5G network will enter a positive cycle.

Source: ifeng.com.

Reserve currencies

In August 1971, the then-U.S. President Nixon announced that the U.S. dollar would cease to be exchanged for gold.  In the following years, the U.S. dollar gradually replaced gold as an international reserve.  Fifty years later, although the U.S. dollar still holds hegemony, it is undeniably facing serious challenges, especially the issue of whether the renminbi will replace the U.S. dollar after China’s rise. 

Harvard University professor, Kenneth Rogoff, pointed out that economic strength is the basis of currency value.  Because, sooner or later, when China’s economic volume surpasses the United States, the US dollar cannot maintain its hegemony. Perhaps in a hundred years, the renminbi will replace it.

Rogoff believes that the U.S. dollar will gradually lose its hegemony, and currenies will become multi-polar. Europe will use the euro as the major transaction currency, Asia will use the renminbi as the dominant currency, and the rest will continue to use the U.S. dollar. However, he also emphasized that multi-polar currencies would produce greater transaction costs, and countries will still tend to use a strong currency in the end.

To replace the U.S. dollar, the renminbi must first make China’s capital market completely open and free to trade, but in the short term this will cause big problems.   Although Rogoff mentioned that the U.S. dollar may be replaced by the renminbi in the long run, China may not want to challenge the replacement of the U.S. dollar in the short term.  It is expected that the renminbi will play a greater role in international transactions in the future, but the specific degree of internationalization depends on the degree of China’s economic opening.

Brace yourself: The US dollar's big crash has only just started

From the experience of the U.S. dollar, it can be seen that if the renminbi is to replace the U.S. dollar, a large amount of renminbi will be exported to foreign countries in the form of a trade deficit, which will greatly increase the cost of dollar borrowing. From the perspective that the central government has always attached great importance to capital risks and trade issues, China will not be too happy for these things to happen quickly.

In addition, the risk of using the domestic currency as an international currency is considerable. For the US dollar to serve as a world currency steadily, a huge maintenance cost is required, such as a decline in the flexibility of monetary policy. Although the United States used the dollar to grow wealth, it will also cause a decline in the dollar’s credit and cause the dollar to lose its status as an international currency. Such ups and downs might also create an economic crisis.

China undoubtedly hopes to weaken the hegemony of the US dollar, popularize the use of the renminbi, weaken the influence of US economic sanctions on China, and use the internationalization of the renminbi to stimulate China’s financial development. However, replacing the U.S. dollar has a great price. Even if China has this capability, it may not be willing to do so in the short term.

Source: hk01.com.

wanlikhang

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