TL;DR
- China is on the verge of approving a massive stimulus package, possibly driving the crypto market toward another bull run.
- While many don’t see the connection of the Chinese market with the crypto industry, the Asian country has a significant influence on the markets.
China to Approve a Stimulus Package
China’s recently unveiled stimulus strategy is poised to invigorate emerging sectors of its economy without directing resources into its beleaguered real estate market.
“While the package may not be extensive in size, its impact is poised to be significant, given its concentration on pressing global concerns like climate change.”
Zhu Min, Former Managing Director of the International Monetary Fund
The financial boost would accelerate growth in sectors endorsed by the state without causing a substantial surge in debt levels.
Its purpose is to promote industries poised to supplant traditional economic pillars such as real estate and infrastructure.
China amplified its economic backing through measures encompassing the sanctioning of supplementary sovereign debt and budget deficit ratio.
The agenda includes sanctioning an additional 1 trillion yuan in sovereign debt in the last quarter. This decision aims to strengthen efforts from disaster relief to infrastructure development.
Chinese Economic Landscape
China witnessed its debt-to-GDP ratio soar to unprecedented levels in the second quarter. This sparked growing apprehension regarding the borrowing practices of local administrations and their funding mechanisms.
China’s debt is about 280% of GDP, so they can’t introduce an overly large stimulus.
Also, China’s economy has projected a consistent growth trajectory, estimating a 5% rise this year.
The Chinese economy is demonstrating signs of “attaining stability,” an assertion backed by the recent Q3 data that surpassed expectations.
According to economic analysts surveyed by Bloomberg, expectations are set around a 4.5% economic expansion in 2024.
Can China’s New Economic Plan Affect Crypto?
The unfolding scenario prompts a pertinent question: what will be the repercussions of the Chinese stimulus on the cryptocurrency sphere?
Yes, there will be, and possibly even bigger than, the repercussions of accepting the Bitcoin ETF.
In past instances, Bitcoin has exhibited a more pronounced affinity with China’s A50 index than the S&P 500.
China’s economic stability is being tested, especially within its real estate sector – a domain where a critical bulk of Chinese capital is tied up, estimated at around 70%.
This situation could drive Chinese investors to seek alternative avenues for their investments.
Chinese traders constitute a considerable fraction of the trading volume on exchanges such as Binance, with 20% of the total share.
There’s a plausible expectation that the ripple effects of Chinese economic stimulus could resonate more deeply within the cryptocurrency market. Especially considering their current economic situation.
Do you think the bull market will start as the Chinese government approves and starts the stimulus package?
Susan Oh
Susan Oh is a leading figure in the integration of AI and blockchain for social good, serving as the CMO for BeOmni by Beyond Imagination and a civic technologist dedicated to creating scalable solutions. She is a board member of the Blockchain Commission For Sustainable Development supported by the UN GA Office of Partnerships, and a member of the Global Sustainability Network, a joint initiative by the Vatican and the Church of England to combat human trafficking. Recognized with the...
