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Comment by nazgulnarsil | Hacker News Reader

Who wants to talk about china? Over the last few days the volume of transactions on btcchina has doubled. Gov run chinese media outlets have been surprisingly positive about btc. What is going on? One of the potential uses of btc is capital flight, and that is something that china has been incredibly strict about with their capital controls. Why aren't they clamping down?

edit: some commentary from someone in china familiar with the baidu subsidiary announcement: https://bitcointalk.org/index.php?topic=315380.0

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I'd like to see Chinese wholesalers and manufacturers accepting Bitcoin for orders as I think this would be a huge positive indicator for Bitcoin. I think the incentive is there, cut out the middle men (banks) who charge exorbitant exchange rate and transfer fees and the customer/business can both save. This would possibly be the most meaningful utility for Bitcoin to date if it happens.

It's a pretty cutthroat and competitive industry from what I gather as well so Bitcoin could be interpreted as a creative way to be even more competitive.

If this does happen, hopefully the incentive to accept Bitcoin for orders would trickle down the supply chain as well.

The volatility is probably a problem though, if you're operating on narrow margins volatility might be an unacceptable risk unless you're able to come up with a process to sell them fast.

Individual resellers on Taobao don't play on small margins but on specialization and service. They sure compete on price but also on reputation, maybe even more.

So if clients would like to pay in btc, I see them allowing it easily and accepting the risk. However I don't see the lambda Chinese girl paying her purple furr stocks in btc.

Various banks have programs to collateralize chinese assets and offer a loan based on those assets.

eg. You collateralize $10 million in Chinese assets, you get a $8 million dollar loan from a bank branch in another jurisdiction.

Capital controls have already essentially be thwarted by the market, the second item is that BTC actually provides a great public ledger for amounts that would be unfeasible for the usual controls like FINTRAC.

It shouldn't really be called bitcoin so much as bitledger. You also have to consider that factions within the party may think bitcoin will generate more capital inflows rather than capital outflows.

Do loans like that really defeat capital controls? The "owner" of the money has changed, but the location hasn't. The bank giving you the loan is playing a very long game, because they still can't move the collateral out. Right, wrong?

It doesn't have to be a long game as long as they can unwind their position over a longer time frame and with less frictional costs than the individual, which wouldn't be surprising for a large institution.

Not really, as soon as the loan is repaid the bank is whole. The loan originates in a non-Chinese country so when the loan is extinguished the bank has the value of the loan plus interest.

Only if the loan defaults does the bank run any risk of having capital trapped in China. Worst comes to worst they use the capital in China to originate more loans in China. Any bank offering this service has a presence in China so it's not a big deal anyway.

I wonder if it's because they anticipate capital flight - from America, and the dollar. They would dearly love a de-dollar-ized world.

This seems contrary to all of their previous behavior. They remain committed to a strong dollar because that keeps their stuff cheap and generates employment for them, though at significant economic cost.

Speculating: maybe the Chinese like the audit train bitcoin naturally provides.

Speculating, that China has more to gain from Bitcoin adoption than not.

* The Bitcoin mining industry is based on Chinese manufacturers (AFAIK... I'm no expert on mining).

* Bitcoin is a honey badger. Might as well accept it sooner than later.

'FriedCat' is from China.

The Chinese will do anything to destabilize USD

Ridiculous. Why would the Chinese want to destabilize their biggest debtor?

Agreed. China is flush with dollar-denominated assets. Besides, if the dollar weakens it will make Chinese goods more expensive in the US and cause labor unrest in China.

On the contrary, the massive debt owed to China is one of the few things that makes me confident about USD.

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