This would automatically shift demand to digital gold, aka Bitcoin. If that happens, you can expect China to take action restricting purchases of Bitcoin in some time. So a short and quick raise in bitcoin's price would be followed by a dump.
Don't bet on it. First of all, it will boost smuggling and black market activity. Bitcoin is a niche product, only few people are aware of it as an investment alternative. The direct impact of China news on Bitcoin prices is greatly exaggerated.
So I don't expect a rise in BTC price because of it. Even if the scenario you are pointing out becomes reality, restrictions for Bitcoin purchases would not succeed on a large scale, because you can't ban p2p trade.
China doesn't need to import BTC since most of the minted BTC is now mined inside of China. Unless China can track ongoing every BTC mined in China by requiring them to be sold and held on regulated exchanges that never allow users to have access to private keys (which would not be Bitcoin any more), then they have no hope of regulating it.
If China does basterdize BTC that way, then Bitcoin is dead. And we will just move on to another altcoin. In which case the mining farms in China will be useless door stops. Also China would be shooting its own technology sector in the foot. I just don't think China's think tanks are this stupid.
China is powerless to stop crypto-currency.
Besides the capital flight via BTC is so damn small so as to be insignificant. The entire market cap of Bitcoin is only a minuscule $12 billion. The daily volume on Bitcoin is $48 million and RNB forex volume is some $5 trillion annually or $14 billion daily. We need a 10 or 100X higher BTC price before we have to worry about it being significant to China's capital flight volumes.
The correction from $750 due to the fake China scare appears to be a flag pattern. So I am now thinking we may blast right through that cup handle ~$788 and head towards $900.
The (probably complicit) Bitfinex hack and China fake news are probably the Chinaman loading up his wagon with more cheap BTC from shorting. Now time to let it run (up) before the next shorting smash up manipulation.
The strange thing about this is: "restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation" - how come this can be done? Bitcoin addresses don't exist in or outside of China. I do believe that sooner or later the Chinese government will do something about bitcoin - but this ignorance about how bitcoin works shows that this warning is not really from any serious source.
And by they way - please link to those Chinese media reports that you mention - because you care to link to material about their reputation but not really to themselves this is kind of strange.
Here you go in order of the list:
http://www.cankaoxiaoxi.com/finance/20161104/1398956.shtml 中国将限制比特币兑美元 防止资金外流 China gonna limit bitcoin to stop capital outflows
http://news.xinhuanet.com/fortune/2016-11/03/c_129348631.htm 比特币交易变相换汇 风险重重 Bitcoin trading bypass China capital control
http://www.gfic.cn/2016/1103/5890032.shtml 单笔“换掉”500万元，用比特币转移人民币资产 Single trade with bitcoin, 5 millions CNY outflow beyond the borders
They are citing the Bloomberg article as the source. But that article was pulled.
Appears to me that the Chinese are trying to attack the public's confidence in Bitcoin, because they can't stop determined people from using Bitcoin to escape capital controls.
I don't expect any actual crackdown, just this FUD.
Afaics, the only practical technical way this can be accomplished is to ensure that the users never hold the private keys and thus ensuring that the exchanges do not allow any transfers to any Bitcoin address which is not controlled by the exchange (or another compliant exchange). To ensure that no exchange user can reside outside of China and that no such user can withdraw in fiat outside of the Chinese banking system. If they were to allow users to control private keys, then they would have to enforce such tracking on each user which is impractical to enforce.
Thus this proposal means that the Chinese could no longer participate in for example a social network (such as the project I am working on) where the crypto-currency moves from user-to-user regardless of their financial jurisdiction and in which the users control their private keys.
In other words, China would effectively be removing their citizens from the Bitcoin (and crypto-currency) ecosystem.
I don't see any way they can do this and not render China a 2nd class citizen on the future of the Internet economics. They will stunt the development of their own Internet software technology sector.
If China was going to do this, I think they would have done it a long time ago. I would tend to think this is some rumor put out there by those who wanted to make a lot of money shorting. Another sign that the corruption in governance also exists in the government of China's finance bureaucrats (and who would be surprised). Nevertheless before this could actually become a regulation, I think very astute people would have to sign off on it, and I just don't see China shooting themselves in the foot. They are too cunning for that. That Bloomberg has pulled the news off their website is another indication that this was probably malfeasance.
I see this as very likely a buying opportunity and a bear trap due to some errant malfeasance within the Chinese bureaucracy.
And also that the China's oligarchy control over Bitcoin mining and price is growing. If true, this corrupt influence over Bitcoin is what Bitcoin was supposed to eliminate. But the problem is Satoshi's proof-of-work design naturally centralizes due to economies-of-scale.
I have a video which explains this in some detail. And also we can see the control over the exchanges by governments is another choke point of control leading to such malfeasdesignance.
We need to do something about this technically. I am working on it. I have a design
for unprofitable proof-of-work to address this problem. TPTB_need_war (who some think is me since I am reputed to be AnonyMint) has also done
conceptual technical design work on decentralized exchange (and there is some new research on that I haven't yet published). But decentralized exchange probably isn't really the solution because speculators don't want to trade where volume is low and trades aren't instantaneous. Instead the solution is probably about how we onboard millions of users and thus create an ecosystem where fiat is irrelevant for the users, i.e. the crypto-unit becomes the unit-of-account. In that case, the speculators become orthogonal to the users to a great extent (not entirely of course). If China were to wall off their population from this sort of Internet ecosystem, they would I think fall to 2nd class citizens on the Internet. Building their own walled gardens for such would again mean centralized control over private keys, which would mean massive failure due to hackers.
China will lose this gambit (of control over crypto-currency) eventually.
I expected a correction because the price went too high too quickly. Most of the time when we see it spike high like that, it will come back a little.
They will play you as well, because you'll be the one who sells too early when the price rocket goes into a phase transition run to ATHs. They will eventually do that after they done shaking weak hands out. Your stance can be characterized as another form of weak hand because of selling too soon into a bull run.
The first bubble to $1200 in 2013 was the first hump of the typical new technology invesment. The second major hump is the big enchilada and you should never sell except possibly to trade to altcoins to increase your BTC, if you are so inclined and are astute at such speculation.
