PUNE (CoinChapter.com) — China’s crackdown on crypto sector is getting intense. What started as a suggestive embargo to protect the people’s financial interests earlier this year is now unfolding into a string of ulterior objectives.
China stops Forex exits
To start with, its timing is right in conjugation with the growing capital flight from China.
From taxing and systemic purging of the domestic major technology unicorns to making conditions equally tough for foreign companies, Beijing has repeatedly asserted its authority. Nonetheless, it has done only to lessen the investment juggernaut across the country, to force capital movement away.
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The co-incidence appears to be an attempt to block the possible escape route by force, via crypto, and as of Sep 2-2021, forex as well. Forex was the only option available to facilitate the crypto trade.
Travel restrictions alone have helped the cause to about $350 billion by stopping outbound tourism and keeping savings at home.
Surprisingly high Current account surplus
With the major Chinese giants like Evergrande, Sinic Holdings, and the China properties group heading into defaults and the premiere engaged in rising rivalries around the world due to Covid-19 and false land claims, eliminating famous business leaders, the business world is expecting a major financial crisis arising in China that would affect major connected economies.
However, in the last three months, China has been showcasing resistance against the allegations with high levels of current account surplus and domestic savings like never before. Moreover, there is a stark deviation between the estimated dollar reserves with PRC and the actual, super-high amount, citing some mysterious recycling of the US dollar.
Safety against BOP and Foreign-debt trap
While it is evident that the dollar reserves offer the PRC a significant resistance against the external economic shocks, the stressed companies, and their unfortunate stakeholders, on the other hand, have to wait for new debt, the one brokered by the government itself to kick in.
“It is exceedingly difficult to get a clear view of how China’s current account surplus is recycled,” said Alvin Tan, head of Asia foreign-exchange strategy at RBC Capital Markets in Hong Kong.
Nonetheless, the healthy surplus means that the Dragon looks prepared for the upcoming geopolitical challenges without risking a balance of payments or the foreign debt trap.
