China has at best a mixed history on blockchain. Publicly, it has included blockchain as a critical technology in its 13th 5 year plan. So clearly, the Chinese government sees decentralized technologies as a critical factor. It has also blocked most forms of coin exchanges, Initial coin offerings and peer-to-peer exchanges. Taken as an aggregate, however, these stances actually make a lot of sense.
China has a history of a strong desire to control flows. Flows of people, flows of information and most of all flows of money. It is worth remembering that for many years, two forms of currency existed in China – Renminbi or People’s money, and Foreign Exchange Certificates. Renminbi could be used only within China, and generally could only buy Chinese domestically manufactured/grown goods. Foreign Exchange Certificates would buy foreign goods and were considered much more valuable.
It is safe to say that based on this that the government of China has always considered the flow of money to be a critical control point. Even now, the government maintains a bureaucracy to control the exchange of Chinese currency. There is no question, therefore, that things like international cryptocurrency exchanges that by their very nature are outside of governmental control would be an anathema to the Chinese government. The surprise is not that they shut them down, the surprise is that they ever allowed them at all. Same with peer-to-peer exchanges. If you avoid the banking system, you avoid the government and that is not suitable for them.
None of this should imply that the Chinese government does not see the value of crypto currencies, exchanges, and peer-to-peer. Rather, it seems obvious that the Chinese government sees great potential in these mechanisms as a means of even more extensive control over the flow of money in China. Remember that in China, the Chinese Communist Party is the only legitimate representative of the public (just ask them), so a technology that allows for public registration of agreements, currency exchanges and any other use of blockchain represents not only a legitimate area for the government to control, but one that is critical that they do control it. Blockchain becomes a key and critical part of managing the most critical flows in a country as huge and populated as China.
This means that opportunities with blockchain and China cannot be viewed simplistically. This is not an opportunity to build software that will allow cross border exchanges. It is an opportunity to find business needs that can have two paths, one for China and one for the rest of the world. And it is a warning shot for the rest of the world that China wants to build software that reaches out from China and exists within their control. Like WeChat and Alibaba, the government of China has no issue with technology that reaches internationally from China, but it has considerable problems with technology that reaches internationally into China.
