INSIGHT: Why China Is Trying To Murder Bitcoin

[Article taken from Yanna L of Hong Kong. Originally written on 29 August 2018. Republishing it here with his full permission.]

Perhaps many of us are confused as to why China is particularly anti-Bitcoin, and would do everything they could to clamp down on Bitcoin, including its recent move to stop all Chinese social media from posting about Bitcoin.

Well, I didn’t know either, until I learned more about China when I stayed in China for a year not very long ago. It has to do with the politics of China. Read on.

The Politics

In China, the governor of the country has no legitimacy, because he or she wasn’t elected by the Chinese citizens. Every Chinese president in the past and up until today, comes in to power through a lot of internal fights in within the Chinese Communist Party.

When you see news of a Chinese official being jailed for corruption, you will have to understand it differently in China. In the Chinese translation, it literally means one person is dragged down in a power struggle and is now imprisoned just so the other person could step up.

Forget about the corruption part. Everyone is either bribing, or bribed in China. Yes, including the person at the very top himself. Read the Panama documents yourself and you will not be surprised.

The monthly salary of a Chinese president is about US$1,800. Yet he owns assets of up to the billions in figures. These presidents aren’t businessmen either. Do a simple calculation and you will realise the maths don’t add up.

So everything about politics in China is just a power play among the ranks in the party. Understanding this context will get us closer to understanding why China is so anti-Bitcoin.

In Order to Sustain Power, the Current Leader’s Only Card Is to Silence Their Own People by Promising to Them The Good Life — that Performance Legitimacy vs Actual Legitimacy

In China, nobody likes a dictator. Someone who dictates every part of their lives — from their rights to go on to the internet, to their freedom of speech and even to policies that say they can’t have more than one child, or that they can’t leave the country without first having the party’s permission.

Yes, China is weird. You actually won’t be allowed to leave the country at your will if you said something that rubbed the leaders the wrong way. They don’t want you to black mouth them overseas and they will stop you at the airport, right at the departure hall. (If you are a Chinese national, holding a Chinese passport. Interestingly, they will let you go if you’re a foreign passport holder.)

There have been countless occasions where professors who speak up openly against the communist party were barred from leaving the country, and of course we have Liu Xiao-bo, a Nobel Peace Prize winner who preached democracy for China but was then locked up in prison till the day of his death in July 2017.

The Only Way for Governance to Function is that the Economy Must Function — be It Real Growth or False Growth

Capital must stay in China for the Chinese economy to run. In the past decade, China has made a fortune by taking advantage of its trading partners, such as the USA and those in the Europe. The annual trade deficit between China and the USA in the past decade was between US$200 billion to US$450 billion.

The Chinese Communist party and their puppet-controlled businessmen then practise various administrative trickery to stop foreign investors from taking their earnings back home through what they call overseas transfer limits, which are monitored by the MOFCOM (Ministry of Commerce) of China.

Or in other possible manifestations, they will raise your tax for your factories, and/or induce heavier burdens on your operations if you intend to take home your winnings without further investing into the business in within their controlled economy, in accordance with their planned time schedule. (There is no rule of law in China in the way we in Hong Kong or the western world understands it). It’s a purely executive-led political and economic system.

So as long as the money doesn’t leave China, the Chinese Communist party can control this sum of money they earned through heavily taxing the foreign businesses that are unfortunately bound. With the money, they can then allocate different work projects at different parts of China to keep every average Joe employed and happy.

Be him or her a labour worker at an I-phone manufacturing house, or a construction worker working at another newly set-up project for a slightly-lower-than-median wage.

China is not a free economy. It’s a controlled and rigged economy. That explains why many bridges and apartments were built and then quickly wasted to become the “ghost cities” because nobody is moving in. Supply is not created to meet demands in China.

They are artificially created to keep everyone employed. Chinese people are not as well informed about values like freedom and democracy since they never grew up with it.

As long as they are well fed, they don’t protest all that much. But if they aren’t, they would go on a riot about it. They probably won’t go on a riot about not having voting rights. But when it comes to not being able to put food on the table, they certainly will.

It will quickly escalate and scale up in this population of 1.3 billion people. It will come to a point where it will be uncontrollable and those in power will be overturned.

Now If You Understand Me So Far, You Are Closer to Understanding Why the Chinese Communist Party Hates Bitcoin All that Much and Will Do Everything They Can To Kill It At Its Infancy

In the current trade war between the United States and China, the Renminbi has crumbled. Up to approximately 10%. Their stock market has crumbled, for up to about 30%.

Their unemployment rate has shot up to unprecedented heights because the manufacturers are leaving China in fear of the tariff imposed by the US on Chinese manufactured products.

The major foreign investments in China today are leaving China and every Chinese citizen can smell the burn at the backyard. Something is wrong.

The Renminbi they are holding on to can only go down. They need a way to convert their hard earned cash to something else. Ideally even outside of the country, so that the government can’t seize their assets at will.

Note that China’s rule of law ranking is 87 out of the 102 studied nations in 2017 by the World Justice Project, while Afghanistan is ranking 89, and Venezuela is ranking 97.

The Chinese Communist party can literally seize the every piece of asset of their citizens without having to go through a court procedure. Just like how any Chinese citizen can be sent to a labour camp with no evidence of conviction needed.

In the current trade war, the Chinese Communist party has limited the outbound transfer limit of each person from US$50,000 annually to just a mere US$10,000 annually. They are getting desperate. Cause they know this is a downward spiral with no return.

Once everyone sells their Renminbi, their stocks and their houses and decide to hold on to USD or foreign assets, the trade once in favour of the foul plays of China is now reversed to have money going back to the USA and other developed nations.

A group of citizens who see this coming will sell first. In order to calm possible nationwide outburst due to the sudden stock market and housing market collapse, the Chinese Communist party will have no ways but to use their reserves to stabilise the market by buying back up on the stocks and houses and their own currencies. While ironically at the same time, these early sellers will then take the money they got off the market and store them in USD or Euros overseas.

This reversed depletion pattern means the US, Canada, and basically all the developed European countries, such as Germany, the Great Britain, France and all the like are reversely juicing the Communist party’s reserves out through the panic capital flights of their own citizens.

The vote has been casted. Chinese citizens put down their votes by moving their money into foreign currencies and assets. If this does not stop, the Chinese Communist party will crumble.

They will have no more cash left in their reserves to feed the crowd or to silence their opposers through their typical media control trickeries. They will not have the gigantic reserves like they had to bribe out tycoons in order to silence them up.

The only reason why the communist party is still running their show is because of its “performance” legitimacy in the past two decades. Everyone’s either silenced or could at least put food on the table.

So we didn’t see any major outbursts other than the remnants of tampered disgruntlements as against the party.

But if they can’t hold this baseline, it’s only going to end very badly for them. It can scale up to a nationwide riot demanding an immediate overturn in no time. It’s gonna end messy, and perhaps even bloody. (See the 1989 Tiananmen Square crackdown for example.)

Now We Get to the Bottom Part — Bitcoin Means a Free-flow of Money, and China Simply Can’t Let that Happen

Now we have come this far, and have finally get to the very fundamental part. Bitcoin, or any cryptocurrencies of that sort means a free flow of money. The party doesn’t want the money to flow outwards.

That’s their only bargaining chip to stay in power. I wouldn’t think they would want to lose their tight grip over it.

There have been many unreported ways the Chinese use to withdraw their money to overseas for more stable currencies and assets, despite the tight controls enforced by the party. I don’t know too many of them. But in that context, Bitcoin definitely is one of them. Simply because of its free-flowing nature.

That’s the unfortunate reason why China has to murder everything Bitcoin or cryto-related.

Sorry that I have to deliver a negative narration. But this is just how it is, according to the China I know.

This Article is adapted from coinroro.com, with permission given by Yanna L, the original author of this article in Hong Kong. This article was originally published on 29 August 2018.