Chinese financial markets don’t typically get a lot of press in the English-speaking world, with the occasional exception of some finger wagging about the lack of proper government controls over what goes on, or the occasional reference to a “shadow banking system”, something which presumably takes place in dark and foreboding back alleys. [The more mundane descriptions – e.g. people loaning money to one another – just don’t sound exciting enough, do they?] Though I have shared a few observations from the front on such topics, e.g. here, here, here and here, no doubt I am also partially responsible for not taking a lot of time to do so.
At least to a certain extent, the recent euphoria over the electronic currency phenomenon has been an exception, as well. Since the recent price surge in late 2013, various commentators have dutifully credited BTCChina with being the world’s largest exchange in terms of trading volume. Despite this limited acknowledgement, if we overlook some of the China-oriented blogs, e.g. Tim Swanson’s “Of Numbers” site, other major Chinese exchanges such as huobi.com or okcoin.com got virtually no English-language press at all. Calculations of “market share” simply left them out of the calculations. Even bitcoin-specific sites such as bitcoincharts.com simply left (and leave) them out of their lists. I am fairly positive that an exchange like fxbtc.com, which was the world’s second-largest litecoin exchange for most of 2013, was never once mentioned in English-language media. True, these sites lack an English-language interface, so they are less accessible to international observers. Nonetheless, even if one factors in the fact that trading volumes can be falsified, to neglect them completely is to communicate a rather distorted view of reality.
Despite the substantial publicity given to recent pronouncements by the PBoC specifying some ground rules, objectively speaking China remains far and away both the largest and the freest market for trading in electronic currency. Where else can you trade for free as well as deposit and withdraw fiat within hours 24×7? Where else do you have 10 or more active exchanges competing for market share? Nothing in the recent pronouncements casts any doubt on the explicit commitment of the PBoC to the free exchange of electronic currency.
To take the opposite extreme, look at India, where until recently the exchanges got away with charging a 3% fee on EACH SIDE OF THE TRADE. Now of course the RBI (the Indian central bank) has banned bitcoin trading completely. Needless to say, there was little bitcoin trading going on in India, even before the ban. Is it a coincidence that the prosperity gap between India and China increases with every passing year?
Of course, to a certain extent this merely reflects the general laissez-faire approach which characterizes the Chinese government’s approach to private wealth, an aspect of Chinese reality which understandably attracts little coverage in countries with more voracious governments. The reality on the ground is in fact almost unimaginable to younger inhabitants of, say, the United States or Western Europe. Not only is there is no capital gains tax in China, but C2C bank transfers are for the most part instantaneous and unlimited. I can send 50000 yuan to my buddy in Xinjiang and he will have it in seconds, all for a token transmission fee. You can also walk into any bank in China with the equivalent of one million euro in cash and deposit it with no questions asked. Simply put, the government’s policy is to leave people and their money alone. While they do endeavor to tax some income at the source, for the most part that’s about as far as they go.