To really understand why China wants to dominate bitcoin, we need to first look at exactly what “bitcoin” is.
Bitcoin: (sign: BitcoinSign.svg; code: BTC or XBT) a distributed, peer-to-peer digital currency that functions without the intermediation of any central authority. The concept was introduced in a 2008 paper by a pseudonymous developer known as "Satoshi Nakamoto".
Bitcoin has been called a "cryptocurrency," because it is decentralized and uses cryptography to control transactions and prevent double-spending, a problem for digital currencies. Once validated, every individual transaction is permanently recorded in a public ledger known as the "blockchain." Payment processing is done by a network of private computers often specially tailored to this task. The operators of these computers, known as "miners," are rewarded with transaction fees and newly minted bitcoins. However, new bitcoins are created at an ever-decreasing rate.
With that definition in hand, it seems a bit more obvious why China wants to dominate bitcoin.
From CNN Money:
Bitcoins are still being viewed cautiously by lawmakers and regulators in the United States. In fact, there are two Senate hearings this week about the risks Bitcoin poses. But that is decidedly not the case in China. There has been a steady drumbeat of positive news in the Chinese press this year, including a landmark report on CCTV, China's national television network.
China's fascination with the currency upstart resulted in an estimated 40,000 client downloads a day and a burgeoning acceptance rate from online retailers down to physical traders standing in Tiananmen Square.
The largest Bitcoin exchange in the world is located securely inside China, and one of the world's largest Internet companies, Baidu (BIDU), is integrating and using Bitcoin. It seems highly unlikely that Baidu would be able to integrate Bitcoin payments across its vast network of users without some sort of complicit nod from higher authorities.
Chinese interest could play a huge role in turning Bitcoin into the first trillion dollar non-fiat currency.
Keep an eye on all the developing news from bitcoin, as the US already has an interest, and may take more of an interest in the currency, since China has so much seemingly vested.