China imposes some of the most stringent capital restrictions of any major world economy. However, the economy is experiencing an increase in the rate of capital outflows over the past few months. While the Chinese citizens are finding ingenious ways to get around financial movement restrictions, the cryptocurrency space in the country has been receiving ample attention.
One of the world’s most strictly regulated jurisdictions have rules such as an individual isn’t allowed to move more than $50,000 out of the country or companies can only exchange yuan for other currencies after approval from authorities. Such rules were constructed when the Chinese industrialization was evolving under the principle of national self-reliance and conservation of scarce foreign reserves.
However, critics do not agree to these capital restrictions. One key function of such a rule was to keep wealthy Chinese nationals from shuffling their capital out of the country. But over the past 10 years, Chinese elites have developed ways to move their money abroad. To an extent that their extensive real estate holdings have become a subject of political controversy in Vancouver and London as it perceived inflationary pressure on local housing markets. Moreover, the well funded Swiss bank accounts held by Chinese nationals is an entirely separate chapter of circumventing the law.
With its tremendous surveillance capacity, the central government is not unaware of the creative ways Chinese nationals use to export capital beyond the $50,000 limit. With over $1 trillion in American bonds on its books, it is highly unlikely that foreign reserves become depleted, this creates a vacuum for cryptocurrencies.
Last month’s Chinese trade data illustrates a significant rise in capital outflows. When a surge of this level happened last year, Bitcoin embarked on a prolonged bull run starting from $200 and eventually reaching its all-time high $20,000. A reason behind this bullish behavior is that the Chinese traders and exporters used cryptocurrency to move large amounts of money out of the country.
Observing the trade data from last month and the current rise of the Yuan, it seems that over the next few months, a Bitcoin Bull can be on the card as Chinese money makes its way into crypto.
Read more: Starting February 2019 China Will Be Censoring Blockchain Companies
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