Everyone at the I.M.F. and World Bank knows what Chinese authorities want, convertibility of the Yuan and reserve currency status. This would eventually warrent SDR, special drawing rights. IF it ever gets going, we’ll see it deep inside China western corridor, the interior known as the ‘Silk Road’ where numerous weak authoritarian government thrive.
As of now though, that’s not what dominates the vision of Chinese authorities. Currently, the yuan is now used for bitcoin transactions. The nascent payment system has lost untolds amount of money from its high of $1,100 in late 2013 to $300 now. Bitcoin has enormous momentum inside China.
The chief culprit isn’t just financial speculation, its mainly driven by people, traders, and institutions who move vast quantities of yuan out of mainland China circumventing currency controls. The foundation of this movement is China’s halting economy providing fewer lucrative investment opportunities. Simply put, bitcoins surging popularity underwrites the fragility of the world’s second largest economy.
While industrial output slows, debt is surging to $4 trillion in regional debt and $20 trillion national debt. That’s only between 2008 to 2014.
Wait, it gets worse. Hong Kong money changers are witnessing the rise of challengers to Bitcoin, which is tapped at $20 million. Darkcoin is fast becomming the choice media of drug merchants and many other black market activites that thrive in China’s interior.
The hidden challenge to Zhou’s rule are crypto-currencies, thriving in an authoritarian world without a rule of law, independent courts or trusted agencies of governance.
China’s threats are growing.