China Reopening Economy Good For Bitcoin

You may have noticed that last year was mainly dominated by the sky high inflation that appeared all over the world. As a result, central banks have had to raise interest rates, but at the expense of the prices of risk assets like Bitcoin. The reopening of the Chinese economy has just begun and according to many economists, this could be the solution to inflation.

Reduce inflation

The big question is how those economists envision this. After all, in general, reopening an economy means increased demand for goods and puts upward pressure on prices. In that sense, you would say that the reopening of China after the COVID-19 lockdowns would further increase inflation.

Robin Xing, an expert on the Chinese economy at Morgan Stanley, explains that China’s reopening will reduce global inflation. This leads to According to Xing ie for standardization of global production chains (supply chains).

Last year many Western economies saw the highest inflation in 40 years due to high energy and food prices. Those prices rose against a backdrop of geopolitical tensions, the pandemic and fiscal and monetary stimulus by many countries.

It is noteworthy that the Chinese government has managed to keep inflation at 2 percent despite its target of raising inflation to 3 percent by 2022. Jing also expects that inflation will not be a problem for China in the coming year.

No inflationary pressure

As China reopens, there is some concern about a return to inflation. However, if you ask Xing, those worries are unfounded. It is true that the reopening of China will mean more demand for raw materials, but on the other hand, demand in the West is currently slowing.

That way, Jing doesn’t expect us to use too many raw materials and that consumption doesn’t exceed a certain limit. “That means China’s reopening will not increase commodity inflation, especially as the US and Europe suffer from weak demand this year,” Jing said.

Xing is right and if China’s reopening causes global inflation to fall as the world’s factories reopen, that will have a positive effect on Bitcoin. Ultimately, higher inflation now prompts central banks to raise interest rates. Once it collapses, the party can resume.