After months of economic war with the United States, the Chinese economy has recently stalled prompting the government to inject billions of yuan as a palliative measure. The move reported by Bloomberg was approved by Beijing to prevent a fall in interest rate following the past months of trade tension with the US.
$28 billion (USD) was pumped into the country’s financial system by the People’s Bank taking the economy unawares as the funds flowed through medium-term lending facilities in banks. Even though the country is not the only one propping up its economy in the face of recent tensions, it is likely that many investors conversant with the crypto economy may use Bitcoin as a sort of stability for their funds.
The report showed deepening factory deflation necessitating the injection of funds in the economy as imports fell in the past few weeks. The 200 billion yuan became necessary as Q3 GDP due for release is expected to show the lowest growth for China’s economy since 1992.
This may not be the last move seen from the PBoC as it is anticipated that the bank is primed to inject some 400 billion yuan into the economy through medium-term loans to enable lower interest rates in the next few months.
The trade war between the US and China has had adverse effects on both countries even as talks have been ongoing in attempts to decoupling. Yuwa Hendrick-Wong, the chief economic commentator for Forbes Asia stated on the issue:
“The US-China trade war, for me, is simply a manifestation of a much deeper transition in the global economy, and I believe China is preparing its economy to eventually decouple from the US over time.”
Even though there may be some investors that may look towards Bitcoin, the effect of this migration would be minimal on the coin market since the cryptocurrency is still largely used as a store of value and not an established means of transfer of value.
The low level of adoption with respect to the world economy would continue to hamper the impact crises such as the Sino-American trade war has on the coin market.