Diversification through Cryptocurrencies
Dylan Run, an executive in Shanghai’s financial sector, exemplifies the new approach of Chinese investors. He began diversifying his investments into cryptocurrencies in early 2023, recognizing the decline of the Chinese economy and stock market. Run considered Bitcoin (BTC), the largest cryptocurrency by trading volume, as a safe haven similar to gold.
Reuters states that Run now holds approximately 1 million yuan ($140,000) worth of cryptocurrencies, constituting half of his investment portfolio, compared to just 40% in Chinese equities. While China’s stock market has been sinking over the past three years, Run’s digital asset investments have surged by 45%.
Chinese citizens are also utilizing their $50,000 annual forex purchase quotas to move money into accounts in Hong Kong, taking advantage of the territory’s open support of digital assets. This allows them to bypass restrictive regulations within China.
Expansion of Crypto Business in Hong Kong
As retail investors flock to cryptocurrencies, China’s brokers and financial institutions are venturing into the crypto-related business in Hong Kong. With limited growth opportunities at home, these entities are exploring new avenues to satisfy shareholders and boards amid a sluggish stock market and weak demand for initial public offerings.
Institutions like the Bank of China, China Asset Management (ChinaAMC), and Harvest Fund Management Co are reportedly exploring digital asset businesses in Hong Kong.
According to the report, China’s estimated $86.4 billion in raw transaction volume between July 2022 and June 2023 has surpassed Hong Kong’s $64 billion in digital trading. Much of China’s digital asset activity occurs through informal, “grey market” peer-to-peer businesses or over-the-counter transactions.
In Hong Kong, brick-and-mortar digital exchange stores have emerged, offering “lightly regulated” services. Offline shops like Crypto HK allow customers to purchase cryptocurrencies with minimal requirements and without providing identity documents.
It is worth noting that Bitcoin has experienced a 50% surge since mid-October, attracting investors seeking opportunities amidst China’s economic transition.
In conclusion, Chinese investors, driven by the economic downturn and seeking refuge from traditional investments, are utilizing creative methods to participate in the digital asset market. The appeal of cryptocurrencies persists despite regulatory restrictions, and financial institutions are also exploring opportunities in the crypto space.