Arthur Hayes’s analyst focuses on Chinese Yuan (CNY), which has lost nearly 15% of its value against the US Dollar (USD) since the beginning of the year. Then, he raised the question of whether China might consider investing billions of dollars in Bitcoin and other assets as a way to hedge against economic fluctuations.
Hayes said he consulted China researcher Andrew Collier from Orient Capital Research, who proposed examining the gap between China’s net export earnings and its official foreign exchange reserves to gauge potential capital flight.
The data revealed that while China’s foreign exchange reserves have increased by $32.4 billion this year, international net exports have surged by $553.25 billion, leaving approximately $520.85 billion unaccounted for.
Arthur Hayes speculated that a part of this capital could have flowed into some assets. It is possible that China has bought gold and paid down offshore USD debt held by its banks and corporations. He also suggested that some of the capital has poured into cryptocurrencies, especially Bitcoin. China is definitely not buying more US Treasuries, he said.
He also emphasized that the relationship between the Japanese Yen (JPY) and CNY is weakening, suggesting that CNY must weaken to maintain its competitiveness with Japan. Hayes suggested that Chinese capital outflows from the country will likely continue to grow.
China’s investment in Bitcoin is still just a conspiracy theory because the country still maintains a negative attitude towards cryptocurrencies. However, some major cities have taken a friendlier stance, especially Hong Kong.
In May, a court in Shanghai declared that bitcoin qualifies as a virtual asset enjoying the protection of Chinese law, despite the ban on cryptocurrency trading in China.