October 30, 2018 Reading Time: 4 minutes

China is now printing money for Brazil, India, Nepal, Poland, Thailand, Bangladesh, Malaysia, Sri Lanka, and Pakistan, according to a recent article in the South China Morning Post. Until now, the focus of China Banknote Printing and Minting Corporation (CBPMC), the government agency that prints China’s banknotes, had been entirely domestic.

While a nation’s reliance on Chinese exports of gadgets or clothes is hardly controversial, CBPMC’s recent foray into exporting currency has heightened symbolism. Banknote systems are vital national utilities. They can be crippled in a number of ways, the most notorious of which is counterfeiting. This ever-present threat requires significant technical proficiency on the part of the printer as well as a strong bond of trust between a nation’s central bank and the entity that prints its notes. 

The ability of government-owned CBPMC to win the above nations’ confidence illustrates the degree to which China has become a credible player in global economic and political affairs. However, as I’ll show, these wins aren’t quite as significant as the article implies. 

Historically, the printing of a nation’s banknotes has almost always been carried out by an agency of the national government. According to private banknote printer De La Rue’s 2017 annual report, state print works are responsible for producing around 86 percent of global notes currently in circulation, with commercial printers accounting for the remaining 14 percent. 

While there are a number of reasons for the dominance of state print works, the most important one is national security. A central bank must share vital details about its currency’s design and anti-counterfeiting features with its printer. If the central bank contracts with a printer located in a different country, the printer could be forced to comply with the wishes of its government and give up sensitive information about its client. 

Prior to WWII, for instance, De La Rue had a contract to print Thai bahts. When the Thai government allied with the Japanese during the war, the British government asked De La Rue to use the original plates to reproduce baht notes for use by resistance fighters and for bribing Thai officials, according to numismatists Schwan and Boling (1995). 

Another danger of relying on offshore supply is that a foreign government can prevent a printer on its soil from providing its international client with cash, thus starving that nation of vital exchange media. In 2011, for instance, the British government issued an export order barring De La Rue— based in the English city of Basingstoke — from sending dinar notes to Libya to fulfill a contract it had signed with then leader Muammar Gaddafi, causing a dinar shortage. If Gaddafi had his own national print works, he wouldn’t have been susceptible to this sort of pressure. 

The tradition of relying on a state print works goes back a long way. In 1808, the Bank of England’s governing board decided that for security reasons, production should no longer depend on Garnett Terry, a private printer, and hired him as an employee. Prior to 1877, the U.S. Bureau of Printing and Engraving shared the task of printing U.S. banknotes with a number of private firms, but with the passage of a legislative act on March 3, 1877, the bureau was given exclusive responsibility. 

Small nations that lack sufficient scale to justify the costs of setting up and operating a state print works often contract with private banknote printers. Tiny Iceland, for instance, has been a customer of De La Rue for 88 years. The Reserve Bank of New Zealand relies on the Ottawa-based Canadian Banknote Company to produce the seventh issue of New Zealand banknotes while the Swiss National Bank has depended on Zurich-based Orell Füssli Security Printing for over 100 years.

There has also been a growing trend for larger developed countries to privatize state-owned printers. Sweden’s Riksbank sold its print works in 2002, as did the Bank of England that same year (De La Rue was the buyer). Norges Bank, Norway’s central bank, sold its print works in 2007, and Denmark’s central bank, Danmarks Nationalbank, did the same in 2014. The notes of both of these Nordic nations are currently printed by Paris-based Oberthur Fiduciaire.

Nations that have their own state print works will often contract with private banknote printers to deal with “overspill,” or short-term increases in demand that their own presses cannot keep up with. According to De La Rue, overspill orders account for around 3 percent of the market. 

This gets us back to CBPMC’s move into foreign markets. Given that India, Brazil, Pakistan, Bangladesh, Thailand, and Poland all have their own state print works, it is likely that the CBPMC’s contracts were for overspill. Either that or they were asked to work on commemorative issues, which are less important than general notes for circulation. While these contracts are notable in that Brazil and other clients must have entrusted intimate details about elements of their national monetary systems to the CBPMC, these nations are certainly not relying on China for crucial baseload supply — only the occasional top-up. 

The standout is Nepal, which doesn’t have a state print works. The CBPMC is printing the 5, 100, and 1,000 rupee notes for Nepal Rastra Bank, Nepal’s central bank. According to NRB officials, the costs of using CBPMC are less than half of the amount paid to its previous printers, which include Indonesian-based Perum Peruri and Australian-based Note Printing, both of which are state-owned.

In sum, Chinese traction in the small but hypersensitive banknote market indicates that it is succeeding in earning global credibility. However, to date it appears that only Nepal has chosen to fully trust China for its supply of certain denominations. Apart from the Nordic countries and the U.K., most sizable nations continue to rely on their own state print works, indicating that they trust neither China nor any other nation to meet the majority of their banknote needs.

J.P. Koning


J.P. Koning is a financial writer and blogger with interests in monetary economics, economic history, finance, and fintech. He has worked as an equity researcher at a Canadian brokerage firm and a financial writer and publisher at a large Canadian bank. More recently, he has written several papers for R3, a distributed ledger company, on the topics of central bank cryptocurrency and cross border payments. He founded the popular blog Moneyness in 2012. He designs economics and financial wallcharts at Financial Graph & Art.

Koning earned his B.A. in Economics from McGill University.

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