Chinese Banks don’t know how to act appropriately, because Bitcoin is too tiny

Zhang Weiwu comments on the latest news from China. He discusses how his last prediction wasn’t completely correct, but also finds the news amusing. Because in China, it’s always an issue of sizes – and this time, something doesn’t fit

The River God rides the water so great, that it washed away the plain and made it hard for the peasants to see their cattles – only to land in the sea and admit how little he was. (after a parabell from Zhuangzi)

from Zhang Weiwu

I feel sorry for my last article, because my prediction was too optimistic. The recent news means the People’s Bank of China (PBOC) will not allow any growth of Bitcoin, not simply remaining content with “if it is weak, we will allow it survive”. A report says PBOC is angry that after the April 15th deadline Bitcoin’s price rose, and blamed it on the ban not being effectively carried out. In fact, although Bitcoin’s price did rise, this is because it is an international currency and China’s power is already seriously weakened. To interpret this as a “bounce back” for Bitcoin means PBOC is not exactly in “harmony” mode.

But actually the news was amusing. It’s amusing because PBOC criticised the Bank of China and China Merchants Bank for not closing Bitcoin trading accounts. This was an unusual action for a matter as small as Bitcoin, and it reveals an interesting issue about size in China.

Size issues are often overlooked by people from small countries (like the US ;). We have the highest population in the world. Our government has four major tiers (while western countries have only three). When we speak of a small city, we mean that it merely has 3 million residents. 3.6 billion journeys are made in China at new year. The Chinese group decimal digits in sets of 4, instead of 3 (tens of thousands instead of thousands). Before Chairman Mao, the Chinese used hexadecimal instead of decimal for many industries, and Chinese abacuses can operate in hexadecimal. The list goes on. As a result, we have greater magnitudes in every scale of measurement. Big Data has a special meaning here: when size matters in other countries, ‘sizes’ (meaning the magnitudes of size), matter in China.

In China, when something happens, it affects other entities with similar magnitudes. The latest news is amusing, because its effect skipped magnitudes.

Sorry, I am too big to help

Considering the magnitudes at work here, I never believed that some of the Chinese Bitcoin exchanges had the government support they needed to survive. You have someone in Shanghai government? He won’t be of any help when an order comes direct from PBOC. You have someone in PBOC? No chance, he won’t be interested in supporting a paltry Bitcoin exchange – and even if he is interested, it is actually difficult for him to help you. Think about holding a needle to help an ant to fight another ant. Or, considering the magnitudes at work in China, consider helping one bacteria to swallow another.

To illustrate it with real life examples, a Chinese scholar may quote the story of Bin Ji (丙吉), an ancient and accomplished Prime Minister of China, who saw a bloody street fight that ended up with fresh corpses on the road. He passed by without doing anything, because there wasn’t a use for him. I will elaborate this further with a business story of my own:

A few years ago I was bidding for a government contract. It seems our competitor had the edge. One day my business partner walked into my office with good news. His family used to have a close relationship with another family, many decades ago, and had helped them out in difficult times. The other family produced a prominent official, and he found out that this official led a government division in Beijing that covered my customer’s organisation from four levels above. ‘Let me give him a call, and see if this man can help.’

The result: No. My business partner told me that someone with a high position like that man could not act in our favour. He cannot, for example, blame our customer for not giving us the contract – it would be an unusual action, and would be much scrutinised. The high-up official never forgot the kindness of the past. He dined with my business partner and recalled that childhood memory, and even gave him good advice: ‘You need to build a chain of direct relationships from your level of business up to mine. I can introduce some contacts for you to start this task. When that is accomplished, I can announce my intention to help you, and instruct minor officials closer to your level to carry out actions in your favour. But I’m sorry: right now I am too big to help you. Follow this path and eventually you will be doing business big enough to have a use for me.’

‘Yes, I take this tiny, tiny, tiny issue seriously.’

We didn’t get the contract in time. We also didn’t follow that suggested path.

Now, let’s re-read the recent news with this new knowledge. The two banks at fault did not originally choose inaction to profit financially. They know that following the intention of the lord is the only right way to prosperity, and their profit from the Bitcoin exchanges is nothing to them. The reason for their inaction: it was too small an issue for them to act appropriately. The two banks’ leaders must be feeling silly and resentful, as PBOC passed the tiny, tiny, tiny issue of Bitcoin down to their level, when their everyday issues are magnitudes higher than the miniscule market cap of Bitcoin. PBOC never before issued a command as small as closing 15 start-up companies’ bank accounts. Each level must have attempted to pass down the order, but the chain of command broke somewhere – they have no experience in carrying out such small things, sent down from PBOC’s level. Should the banks check if exchanges have one or two companies? One or two accounts? Should the banks register as clients on the exchanges to get the account list? Should a blacklist be set up across banks? Bitcoin is tiny in the financial sense, but it is revolutionary in its essence. The banks are bowing to their master, asking for pardon whilst thinking the master a complete weirdo. PBOC, in a serious tone, has delivered this message: ‘Yes, I take this tiny, tiny, tiny issue seriously.’

PBOC found it surprisingly difficult to close 15 start-up companies’ bank accounts. It had no macro-management department, so it had to use two of its second-highest-ranking officials to call attention to the banks, for the second time. This action also reveals another important aspect of bitcoin decision-making in our government, which I will detail in a future article.

Men should not naively wish to be born in a country that allows polygamy. The supply of women in their country is no higher, and so many men will never get to marry. People, too, should not wish to be born in a country of greater magnitudes. The supply of everything is not higher, and thus many became insignificant and deprived. This fact has a great influence on Chinese culture – and this, too, will be addressed in a separate article.

 

The author is a Chinese entrepreneur. He has been doing IT business with German customers in China for 10 years. He believes bitcoin is the greatest invention in this decade, and is actively looking for opportunities and partners to establish new types of business with bitcoin. He can be reached via linkedin