China Printing India’s Banknotes Is A Great Idea – Even If It’s Not Happening

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The thought that a Chinese company might be printing India’s rupee banknotes has the more nationalist there – for which read far too many – up in arms about this selling out of vital national sovereignty. A ridiculous conception stemming from not understanding the difference between making money and making banknotes. India giving up the right to make its own money, to make rupees, would be a disastrous idea. India hiring someone else to come print the rupee banknotes is somewhere between trivial and sensible.

That’s not quite how it seems to some:

Indian MP Shashi Tharoor was among those who demanded a comment from the Indian government.

Other politicians, including the spokesman of the Delhi state government, said the move would endanger India’s “financial sovereignty”.

Deciding how many rupees there should be is an essential part of monetary management. Deciding who prints the pieces of paper which represent the rupees means nothing. Even though it does in Indian politics:

China has been printing foreign currencies on a massive scale as more and more countries outsource money production in a bid to keep costs down.

The country’s currency printing plants are running at near full capacity, according to South China Morning Post citing sources at the state-owned China Banknote Printing and Minting Corporation.

After launching the ‘Belt and Road initiative’ in late 2013, China has won contracts for money production projects from countries such as Thailand, Bangladesh, Sri Lanka, Malaysia, India, Brazil and Poland.

China is said to be able to provide security features such as embedded thread, metallic ribbon and colour-shifting ink at a relatively low cost compared with their Western rivals.

That’s all terribly lovely but it’s not really the point. This is:

China’s attitude towards printing currency marks a change from previous low demand for printing as Chinese citizens have turned to using their phones rather then cash.

China has, in the past, made a vast investment into being able to produce the currency necessary for an economy of 1.3 billion people. They now need less of this cash as electronic money takes over. They’ve thus a large sunk cost in being able to produce currency. Why not rent that out to other people at cheap rates? Their printing costs seem to be about half global ones – presumably because government accounting isn’t trying to make a profit on the sunk cost while private sector printers will.

The benefit to the buyers is that they get cheap printing.

Despite all that it’s most unlikely that India is partaking:

The government has now refuted the claims saying, “Reports about any Chinese currency printing corporation getting any orders for printing Indian currency notes are totally baseless.”

Subhash Chandra Garg, secretary in the Department of Economic Affairs said, “Indian currency notes are being and will be printed only in Indian government and RBI currency presses.”

Back two years during demonetisation this was a point that I made. We could tell when there would be enough money of the new notes by just looking at the capacity of the Indian printing presses. I even said that it would be sensible to have outside printers do some of the work to reduce the interruption, but that this wouldn’t work for political reasons. So it turned out. And if India’s not going to turn to outside printers when it really needs to then it’s not just to save a little on the price, is it?

Who prints the notes is sublimely unimportant even as who decides how many notes there should be is very much so. Even then, India’s not using those cheap Chinese presses although other people are.