Xi Jinping is, without a shred of doubt, a very powerful man. With a public statement that he was going to push hard into blockchain technology, every stock even vaguely related to blockchain received a very healthy boost.
Dozens of companies smashed through the 10% daily limit in stock price rises, with Zheijiang Huamei Holding Co Ltd. and Julong Co Ltd being just two. Bitcoin has been enjoying the benefits with it pushing up 30% in value after Xi’s initial announcement. Even companies with vague blockchain connections have enjoyed the benefits. Selfie-app developer Meitu Inc and baby-food producer Beingmate Co. had their stocks rise as well.
This all came from Chinese President Xi Jinping declaring that China needs to embrace blockchain technology. He chaired a study session last week focused on developing the industry, something the state-owned company Xinhua reported on Friday. High-level officials will come together in a major policy meeting to enact Xi’s vision on Monday. This is the first such meeting since early 2018.
Li Shiyu, Fund Manager at Guangdong Xiaoyu Investment Management Co, stated that many companies are capitalizing on the hype. He pointed out just how much positive sentiment was generated just by Xi stating an intent to embrace blockchain. There is no official policy in just yet, but companies’ stocks are rising up rather nicely only from Xi’s word alone.
The Shenzhen Information Technology Index rode this wave of good sentiment as well. It jumped up more now than it did in just under eight months, clocking a 5.3% rise on Monday. Coupled with that, Chinese blockchain companies experienced a surge of American depositary receipts on Friday.
It’s come to a point where other investors are leaning on companies to jump on blockchain to capitalize on the hype. They made use of an online Q&A platform, submitting hundreds of questions regarding their various companies’ plans for using blockchain technology.
While it’d be silly to assume that Xi made this announcement without something substantial already in mind, this is an unexpected step. China has been relatively against blockchain due to its common connection with cryptocurrencies. The country has made it clear that no form of crypto-exchange would be allowed within the country. However, they’ve been developing a digital RMB for some time now. It shouldn’t be a surprise if they announce this new RMB Token in a month or three. Xi may be powerful, but he’s smart too. There is no doubt that this plan had long since been in the works and only made publically now.
The massive amount of hype in the stock and crypto markets will die down after a bit, but there will be a lingering sentiment for some time. At the time of writing, Bitcoin prices are sticking above the $9000 mark after the announcement. Whether or not this is a momentary lull in the steady downturn the cryptocurrency has felt remains to be seen. All of this rests on Xi’s next move.