The impending (and almost certain) closure of the bank withdrawal channels of Chinese exchanges will inevitably lead to transfer of some of the coins that are now in their client accounts to the Western exchanges.  More coins, no new dollars, can only cause the price in the West to go down. The only question is by how much.

How exactly that will play out seems still uncertain.  The Chinese exchanges have been remarkably silent after the last PBoC move, in contrast to the weeks after the late March Caixin leak.  One of them at least has said that it will avoid public announcements because it does not want to cause commotion in the market.

I wonder how far they will take this new "PR policy":

  1. The Chinese exchanges may give their clients advance warning of the bank withdrawal closure, or the closure will happen only on the May 10 deadline.  In that case I expect that there will be a rush by most Chinese clients to sell their bitcoin (which they cannot use for commerce in China, and probably do not believe it ever go to the moon) and withdraw the CNY while they can.  Other clients who have some connection to the West may choose to move their bitcoin to Western exchanges and continue trading there.  Abitragers, habitual or improvised, will use any CNY still in their accounts to buy cheap coins there and sell them in the West.  Then the price will drop in the Chinese exchanges, and the Western ones will follow.

  2. The Chinese exchanges will close CNY bank withdrawals before May 10, without advance warning.   Then many clients with CNY trapped in their accounts will try to buy bitcoin to move them out.  The price of bitcoin in China will probably rise sharply.  Arbitragers, insiders, and other clients who have other ways of withdrawing CNY will make handsome profits at the expense of ordinary clients.  Arbitrage may temporarily transfer some of that price increase to the West, but that will be counteracted by the pressure of other clients moving bitcoin to the West, even at a loss, to get their money out.  Since in the end the net amount of bitcoin in the Chinese exchanges must decrease, the latter effect must predominate, so the price in the West will decouple and fall while it rises in China.

  3. The Chinese exchanges may just shut down without any prior warning, or block bitcoin widthdrawals as well; so that both the CNY and bitcons of their clients will be trapped inside, except perhaps for some privileged users or some restricted non-bank channels.  This option seems very unlikely, considering what happened to the owners of the GBL exchange.

In any case, I imagine that some Chinese traders who keep most of their bitcoins in private wallets, outside the exchange, may want to sell them, since the withdrawal restrictions may take all the fun & profit out of the bitcoin speculation game.  Therfore some of those coins will also find their way to the Western exchanges.