- China may raise an additional 6 trillion yuan (approximately 857 billion USD) over the next three years through long-term bonds to bolster its slowing economy.
- This fiscal stimulus could provide a boost to risk assets, including cryptocurrencies, influencing global crypto markets.
In a move to fortify its decelerating economy, China is poised to issue 6 trillion yuan (approximately 857 billion USD) in special long-term bonds over the next three years, as reported by Caixin Global. This fiscal initiative is aimed at reviving the country’s economic momentum and reducing the debt burden of local governments, which is approximately 5% of China’s GDP.
The announcement comes at a time when China’s economy has been showing signs of strain, prompting the government to adopt measures to stimulate growth. Previously, China had cut key interest rates and provided cash handouts to some citizens. More recently, the Finance Minister hinted at a significant upcoming fiscal stimulus, though the exact details were not disclosed.
Market Implications and Crypto Impact
Financial markets and cryptocurrency investors are keenly watching these developments. The large-scale monetary easing could create favorable conditions for risk assets, particularly cryptocurrencies. Bitcoin, for instance, has already shown a resurgence in its price following these announcements, with its value rising over 7% from the previous week and 11% from the last month to approximately 66,000 USD (9.84 million yuan, approximately 1.41 million USD).
Cryptocurrency analysts and investors are speculating that along with other global factors, such as the U.S. Federal Reserve’s rate cuts and the U.S. presidential election dynamics, China’s aggressive fiscal policies could further energize the crypto market. Notably, the gap in support between U.S. presidential candidates regarding cryptocurrencies has been a significant factor in recent market movements. The Republican candidate’s strong endorsement of cryptocurrencies contrasts sharply with more cautious views from other candidates, adding another layer of complexity to market predictions.
Moreover, industry experts like Matt Hogan, Chief Investment Officer at Bitwise, have pointed out that China’s ongoing monetary policy easing might continue to drive Bitcoin’s price higher, potentially reaching as high as $80,000 (approximately 11.93 million yuan, roughly 1.71 million USD) by the end of 2024. However, some analysts remain skeptical about the effectiveness of China’s financial maneuvers and advise caution, noting that investors might revert to traditional stocks in response to government stimulus measures.
As China prepares for the upcoming session of the Standing Committee of the National People’s Congress to approve the supplementary budget, all eyes are on how these fiscal measures will unfold and their eventual impact on both the Chinese economy and the global cryptocurrency market. The potential for China’s bond issuance to catalyze a significant shift in the financial landscape is immense, making this a critical moment for both economic and investment forecasts.