This week in China one news item just seems to roll right into another, causing the whole economy to jam up.
The announcement last Friday that the central bank had forbidden Chinese financial institutions from dealing in bitcoins means many deals are going to have to be funded by, you know, real money, and not what has become China’s official non-official currency. These include potential new ships for COSCO and Alibaba’s logistics tie up with Haier.
Spanish bank Santander is fuming – it thought the stockpile of virtual coins it had been amassing and seen explode in value this year would give it a bargain in its purchase of a stake in Bank of Shanghai (which was rumored to be getting a license to mint bitcoins). Now it will have to pay in good old US dollars, which are trading at 20-year low versus the yuan.
Samsung voted with its feet at the news, saying it will pull its factories out of China and reassemble them piece by piece in Vietnam. Labor there is apparently much cheaper and the firm has the added benefit that Vietnamese workers are happy to be paid in K-Pop CDs and don’t require coins of any kind, hard or virtual.
It is little surprise then that Tencent is scaling up its investment in China’s less fashionable new economic zone in Qianhai. The poor cousin of the China (Shanghai) Pilot Free Trade Zone has said it will allow bitcoins to be used to pay for “things.” Tencent has been dabbling in financial services and sees digital coins as the new gold, so South China is the only place it can go play.
One group laughing at all this are officials at the National Development and Reform Commission, who on the weekend told they were being stripped of several economic powers, including the right to supervise bitcoins. The move had been held up as a sign that China was stepping in to break up the control of powerful state bodies, but losing the right to regulate a currency that has now been banned is hardly likely to cow other bureaus with vested interests.
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