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  • On this episode of China Uncensored,

  • China is going through a big change.

  • People are getting rid of their cash.

  • Not like that.

  • Hi, welcome to China Uncensored.

  • I'm Shelley Zhang

  • the voice in Chris's ear,

  • and your temporary host

  • until Chris realizes how much he misses

  • New York City in the winter.

  • Or we all move the show to Hawaii.

  • You know, when I was a kid,

  • I thought the future would bring us

  • robot maids and flying cars.

  • Instead, we got cats on Roombas

  • and the ability to pay for bus rides

  • with our phones.

  • If anyone from the flying car future

  • wants to trade,

  • call me.

  • Unless you're also possibly about to

  • go to war with North Korea.

  • Anyway, the point is,

  • the future is now,

  • and it's in China.

  • Because China is getting rid of old-fashioned cash

  • in favor of paying for stuff with your smartphone.

  • Whether you're at a vending machine;

  • a toll booth;

  • or....a literal meat market;

  • nothing makes you forget

  • how much you're actually spending,

  • paying like scanning a QR code.

  • It's faster than the speed of regret.

  • Mobile phone payment in China

  • has skyrocketed.

  • It was basically nothing in 2012.

  • By 2016,

  • it had reached more than 5 trillion dollars,

  • and it's projected to be more than

  • 10 trillion dollars this year.

  • One analyst predicts that China

  • will be effectively cashless in five to ten years,

  • and that this is a positive thing for business,

  • the government, and the public.

  • China is moving really fast on this.

  • Much faster than the US.

  • I mean, we do have it here too.

  • Like you how your iPhone keeps prompting you

  • to add ApplePay,

  • which you finally did

  • but you still haven't used it

  • because your credit card works perfectly fine.

  • Well, in China, most people don't use credit cards.

  • The entire country basically skipped that step.

  • It's partly for cultural reasons,

  • like having debt was seen as a bad thing.

  • It also didn't help that Chinese officials

  • made it really hard for Visa and MasterCard

  • to access the Chinese market.

  • Americans still use mostly credit cards.

  • In 2016 Americans spent only $112 billion

  • through mobile payment apps like ApplePay.

  • That might sound like a lot,

  • but it's not.

  • Chinese citizens spent 50 times as much

  • using their phones.

  • They're not using ApplePay, though.

  • Most people are using one of only two

  • giant Chinese homegrown payment services:

  • AliPay and WeChat Pay.

  • WeChat Pay is owned by Tencent,

  • which created the WeChat app

  • the all-knowing social media app

  • that's constantly watching you,

  • as Chris showed in our episode on August 23rd.

  • AliPay is even bigger.

  • It's owned by Ant Financial,

  • which I mentioned on Monday;

  • it failed in its bid to take over

  • an American company.

  • These two giant companies

  • have cornered China's mobile payment market,

  • and they're on track

  • to make billions of dollars from it.

  • Between the two of them,

  • in 2016 they processed as much as

  • $5 trillion in electronic payments,

  • which is equal to a third of China's GDP.

  • Nearly all merchants in China's biggest cities

  • allow customers to pay with AliPay and WeChat.

  • It's so common that 14% of Chinese people

  • don't even carry cash anymore.

  • Such a massive shift in how people spend money

  • will affect everything from China's overall

  • economy and society down to

  • the life of your average Zhou.

  • The biggest benefit for Mr. Zhou is

  • of course, convenience.

  • Forget fumbling for your wallet,

  • just pay with your phone,

  • which you're already holding,

  • all the time.

  • But convenience does come at a cost.

  • For one,

  • people tend to spend 12 to 18 percent more

  • when they don't use cash.

  • I mean, when you can't see the money

  • disappearing from your wallet,

  • it's easy to lose track of

  • how much you're spending...

  • on books...

  • and shoes...

  • and...I should probably return some stuff.

  • In addition to spending more,

  • all of Mr. Zhou's spending is now tracked.

  • Something one would-be robber in Ningbo

  • found out the hard way.

  • After mugging a woman in an alleyway,

  • he discovered that she didn't really

  • have a lot of cash.

  • So he forced her to send him money

  • using WeChat.

  • Which was genius.

  • Except for the fact that all WeChat accounts

  • require people to register with their ID,

  • so the police caught him immediately.

  • Well, first they laughed.

  • A lot.

  • He would have gotten away with it too,

  • if it weren't for his own stupidity.

  • Remember, by Chinese law,

  • all Chinese companies are required to

  • share user data with the government.

  • Actually, AliPay founder Jack Ma

  • is already offering it up.

  • He talked candidly about helping

  • Chinese law enforcement in ways

  • that would make Silicon Valley cringe.

  • Like by letting Chinese police look at

  • what AliPay users buy,

  • and use patterns to identify potential criminals.

  • Do you really want the Chinese police

  • to be able to monitor everything you buy?

  • Mr. Zhou, is there a reason you bought

  • a pressure cooker, an alarm clock,

  • and 52 pounds of dried squid

  • at 3 in the morning?”

  • I mean, a future where the Chinese government

  • can monitor my every move is kind of scary.

  • On the other hand,

  • mobile payment is pretty convenient...

  • and I'm already holding my phone...

  • But even if you're not worried about

  • the party-state's all-seeing eye,

  • there is the fact that two companies

  • have all of your data,

  • and they're using it in ways

  • that you can't control.

  • Both Tencent and Alipay have

  • recently had privacy scandals,

  • and people are not happy.

  • Now you might be saying,

  • Sure, Shelley, cashless payments are just

  • another way that giant corporations

  • sell us convenience in exchange for

  • all of our personal information,

  • which then becomes another piece

  • of the Communist Party's

  • panopticon surveillance system

  • from which there will be no escape,

  • yada yada yada.”

  • But what does this mean for China's economy?

  • Well, in the short term,

  • it's great for China's economy.

  • Remember, people paying with their phones

  • spend more.

  • More spending is good for local businesses,

  • which circulates money,

  • which fits in nicely with the Party's agenda

  • for restructuring the economy.

  • In October, Chinese leader Xi Jinping

  • said that for China to become

  • a modern economic powerhouse,

  • Chinese people need to

  • increase domestic consumption.

  • That is, they need to buy local stuff,

  • not just export it to the West.

  • We gotta hit that 6.5 percent growth target somehow.

  • But there are also some

  • potential pitfalls for the economy.

  • Remember how I said that Chinese people in the past

  • did not like debt?

  • Well, there's been a huge surge of people

  • taking on debt in the last couple years,

  • because consumers are constantly being bombarded

  • with pitches for loans and investment products

  • via their smartphones.

  • Borrowing a thousand dollars is now easier

  • than getting to level 7 in Candy Crush.

  • China's central bank expressed concern that

  • short-term consumer credit in China

  • soared 160% in the first eight months of 2017

  • from a year earlier.”

  • If you watched our episode on shadow banking,

  • you know that China already has

  • a problem with consumer debt.

  • And this just makes it harder to rein in.

  • And then are concerns over

  • money laundering and fraud.

  • For example, in Guangzhou,

  • $14.5 million yuan were stolen

  • in QR code scams.

  • The good news is that the government

  • is cracking down on fraud and money laundering.

  • They're putting in new regulations this year.

  • They want to start treating AliPay and WeChat

  • more like banks,

  • and set up a central clearing house

  • so regulators can more easily track

  • what's actually going on with transactions.

  • That being said,

  • as mobile payments increasingly replace cash,

  • a lot of people will be left out of the system.

  • See, it's easy to look at images

  • of middle class people in sparkling cities

  • and forget that most of China is still

  • really, really poor.

  • In the countryside,

  • the typical person lives off an average

  • of only $4 a day.

  • 21% of Chinese don't even have a bank account.

  • That's like 300 million people

  • who have no way to access mobile payments.

  • That's a lot!

  • It's like the population of 12 Australias.

  • Or one America

  • minus, let's say, Texas.

  • Oh come on, Texans,

  • you keep saying you're going to leave.

  • Back to China.

  • A lot of poor people will be left out of

  • the new cashless society.

  • But you know who else will be?

  • Tourists and other visitors.

  • Because you need to have a Chinese bank account

  • to use mobile payment services.

  • But the world is marching towards

  • a future of mobile payments.

  • China is leading the way.

  • Actually, if the US hadn't rejected

  • AliPay's takeover of MoneyGram

  • last week on security concerns,

  • we might have even seen it take off

  • much sooner in the US.

  • But even so,

  • the future is coming eventually.

  • I just hope it's not the future

  • where they use it to predict crime.

  • So what do you think?

  • Leave your comments below.

  • Once again I'm Shelley Zhang.

  • See you soon.

  • Thanks for watching.

  • Chris will be back hosting again this Friday.

  • In the meantime,

  • click here on the left to see more