
Why China is leading the global rise of Bitcoin - tjaerv
http://www.coindesk.com/china-leading-global-rise-bitcoin/
======
dualogy
What everyone needs to understand is that Bitcoin is a gift from heaven for
every "productive" country's central bank.

Much of the world is trying to get away from the USD as a global "reserve" and
trade-settlement currency, without the masses jumping into gold and without
pissing of the US (govt, economy, Wall St).

Bitcoin is so much more "tolerated" by Germany and China than it is by the UK
and the US, it's pretty obvious.

You don't really want the masses to rush into gold -- it needs to stay cheap
so oil can stay cheap for whole economies, and central banks can acquire more
of it for a future when intra-national trade imbalances may be settled in a
proven, timeless, globally-accepted (at the central bank level) reserve asset
that's not subjected to any one nation-state's (or state union's) wims or
woes. You also don't want the savers to store their excess savings or
retirement funds in USD or even your own currencies, because they'll be
screwed over. You also don't want all the excess liquidity printed over the
last 5ish years to end up as real-world price inflation on store shelves.
Something like Bitcoin solves all these beautifully, and carries no diplomatic
concerns because it's something that citizens are now just free to adopt as
they see fit.

You think the Chinese want USD long-term? Why on earth would they? They wanna
convert them into other wealth assets, even BTC if they like, asap. Think
about the situation today or more so the last decade or three: they export
something, take in USD. The producer takes those to their bank to convert into
spendable yuan. Their bank takes those to the central bank for yuan. Their
central bank doesn't wanna sit on them either so (traditionally) they buy
treasuries for those USD, which sends the USD back home to the US where
Americans go on the next shopping spree of buying Chinese (in our example)
goods (circle repeats), and when the treasury is due, freshly printed USD plus
a small interest "gain" go to China central bank and they're left holding the
bag once again. What to do with those homeless USD? It's called reserve-
currency privilegue and really the world would be happy to abandon it, but you
can't just flip the switch or madness would ensue. Similar situation for the
majority of producing-and-exporting countries.

Food for thought!

~~~
crdoconnor
The Chinese are not acquiring USD and treasuries so that they can own
spendable assets. They are doing so in order to push the value of their
currency down, so that their export goods become more competitive.

This is done because while currency fluctuations and inflation can jump and
fall hugely overnight, an industrial base takes DECADES to build up and
decades to destroy. China is planning for the long term.

If there ever comes a point where the US industrial base has been effectively
destroyed and China makes everything, they can stop the treasury buying and
start cashing in. Inflation in the US will go NUTS and the US will have to
build an industrial base from scratch -- starting essentially in China's
position circa 1980. Not a happy place.

China will have lost trillions following this strategy, but the US will
effectively stop being a strategic or military threat if it is followed
through to its logical conclusion.

Bitcoin is not a godsend to the Chinese government, as it creates a means to
let capital exit the country (which they are desperately trying to prevent).

~~~
junto
This reminds me of a friend of mine who is Hong Kong born Chinese. I asked him
if he wanted to go to a festival, but he said that he couldn't afford it. I
knew that he earned quite a lot of money and pay day had just gone by, so I
asked him if everything was OK financially.

His answer blew me away. He explained to me that Chinese families don't think
like western families. He pays his parents a seriously large percentage of his
earnings every month. If he wants to buy a house or a car or anything that has
a large ticket price then he, or his siblings just have to ask his parents.
They never have to go into debt and debt was very actively discouraged.

When I asked him why he explained to me that they see the extended family as a
single unit or entity. Every generation is deeply involved with the next
financially. Companies started by the family are seen as very long term
investments. Those investments span more than one generation. In other words,
he could start a company that is successful by the time his grandchildren take
it over.

The idea that I personally would not benefit, but my grandchildren would, was
nuts at the time. Now I have children I'm starting to understand this paradigm
shift.

This is of course a generalization, but the Chinese appear to be very patient
and serious long term investors.

~~~
simonh
I'm a native Brit but my wife is mainland Chinese. My wife and I have always
shared our accounts anyway, and now we're completely plugged in to the family
financial system.

It's a little different with us. Her sister has a family in China (Hohhot) and
her parents sometimes live with us (for several years at a time) and sometimes
over there. Whoever they live with supports them completely, and get their
pensions. So the flow is reversed from what you describe, but the basic
principle of shared financial resources and support is the same. e.g. My
wife's parents own two flats in China and the revenue from them go to the
Chinese branch of the family. We all know basically what everyone else earns
and the money from the 'apex' of the family tree goes where it makes best
sense. In contrast on my English side, every family unit is discrete. My
parents helped us with the purchase of our first house, it's not that there's
a lack of generosity in any way, but arrangements are on the basis of one-time
gifts. The Chinese way is continuous real-time resource management but in
service of a very long term view.

~~~
nichtich
This is the most important reason why Chinese family members don't love each
other that much. You never know if your relatives are just nice to you or they
are after your money. It complicates everything and when things go bad they go
_really_ bad.

If managed well it can be great though. My college roommate has a "college
sponsorship" program within his extended family which helps pay his tuition.

~~~
simonh
I've had to think hard before replying to this. I don't think that's fair at
all. I would agree that the Chinese put a premium on loyalty, and don't have
as much of a culture of open expressions of affection, but that's mostly a
matter of appearance and I've seen it break down many times. I'm not down
voting you, because I can see how you might think that and in the general for
all I know it might even be true, but it doesn't fit with my experiences of my
own Chinese family.

------
gmays
If you look into China's real estate market they've invested billions to build
cities...empty cities. They continue to build because citizens' investment
options are limited, so real estate is one of the few "attractive" options. So
they end up with ghost cities full of unoccupied office buildings, condos,
malls, etc. Crazy, right?

And now they have bitcoin to put their money into. That's a large part of
what's driving the boom. And you know what? It'll keep going. If they're
willing to invest billions in ghost cities they're willing to drive bitcoin
above $10,000.

I'm not bold enough to claim that bitcoin is a bad investment, but to me it
seems closer to gambling than investment. As long as it's money you're not
afraid to lose, go for it. But for me there are too many uncertainties and I'm
not willing to invest the time. There are so many other opportunities.

Edit: Here's some info on the ghost cities
[http://www.forbes.com/sites/kenrapoza/2013/09/24/what-
invest...](http://www.forbes.com/sites/kenrapoza/2013/09/24/what-investors-
really-think-about-chinas-ghost-cities/)

~~~
fleitz
Imagine a country where 1 million extra housing units only represented
1/1300th of the housing needs for the nation. Imagine someone having built 625
extra apartments in SF.

China is trying to urbanize 300 million people, a ghost city here or there is
a drop in the bucket.

------
AJ007
Speculation excluded, currency controls would be a good reason for a Chinese
citizen to "invest" in bitcoin (and cash it out on USD at the other side.)

~~~
D9u

         #include <speculation.h>
             Why cash out on USD when you can avoid doing so?
             As BTC becomes more widely accepted the ubiquity of BTC acceptance will grow

------
hkmurakami
We'll looks like the Chinese govt will now have a huge motivation to thwart
bitcoin's rise within its borders.

------
VMG
Fun fact: btcchina is trading at ~5400CNY/BTC right now, which is
approximately $880 while the average on other exchanges is $700. Good day for
arbitrage.

btcchina:
[http://bitcoinity.org/markets/btcchina/CNY](http://bitcoinity.org/markets/btcchina/CNY)

bitstamp:
[http://bitcoinity.org/markets/bitstamp/USD](http://bitcoinity.org/markets/bitstamp/USD)

~~~
panarky
Good point. As I write this, BTC-China is at 5680 RMB, or 932 USD. Bitstamp is
655 USD, Gox is 776 USD.

Maybe China is driving the demand and other exchanges are arbitraging against
China. Since there's a lag in transferring funds into exchanges, the 20% to
40% premium in China may just be a measure of latency in a fast-moving market.

If so, then we'll see the prices converge over time, and we should use BTC-
China as a leading indicator of exchange rates.

~~~
bernatfp
FWIW, if you are seriously into arbitraging, you won't keep transferring funds
between both exchanges to finish the cycle of buying-selling. What you will
actually do is having half of your funds on both sites and execute both
operations on both sites at the same time to have them match.

~~~
gigq
Yep, that's the only way to do it with zero risk. But since btcchina.com is
consistently higher than the other top exchanges you'll eventually have to
move CNY out of there and bitcoin in. Moving bitcoin there is trivial (which
shows how great bitcoin is) but moving CNY out and converting it to USD for
the other exchanges is trickier (need a Chinese bank account for example) so I
would expect the lag in price to continue.

~~~
bernatfp
Exactly, that's the point I've raised in another comment. By the way, I've
read that Bobby Lee (CEO @ BTCChina) is already dealing with Chinese
authorities to see if he can expand the business out of China (read: accept
€/$). Can't wait to see this happen as well as seeing Litecoin integrated
there.

------
known
American economy will continue to slide till
[https://en.m.wikipedia.org/wiki/Triffin_dilemma](https://en.m.wikipedia.org/wiki/Triffin_dilemma)
is resolved.

[http://www.washingtontimes.com/news/2013/nov/13/bill-
would-o...](http://www.washingtontimes.com/news/2013/nov/13/bill-would-outlaw-
us-dollar-russia/)

------
VaucGiaps
I am just getting a gray page here @ opera.

------
zhaodaxiong
This is the exact reason that people should avoid bit coin... I am serious...

~~~
supergauntlet
Why do you say that? I'm not saying that mining bitcoin is a good idea anymore
(even with ASICS, really) but I'm curious as to your rationale?

~~~
apalmer
His slant seems pretty obvious... Even if he ends up being wrong the logic is
self evident. Communist China is a totalitarian state, Communist China crushed
another virtual currency that caught on a couple years back, therefore if the
raise from ~$100 a bitcoin to ~$600 is due to chinese involvement you probably
should assume its gonna go back to ~$100 as soon as the communist government
flexes its muscles.

~~~
hayksaakian
The real question is: can then even do anything about a decentralized
currency?

~~~
wmf
China drove up the exchange rate 3x; what makes you think they couldn't drive
it right back down?

