UBS is bullish on the launch of China’s national digital currency, touting the development as another arrow in the country’s quiver of global technological ascent.
«We are at the cusp of another major digital revolution in China,» said a recent UBS report on China’s ongoing digital currency (DCEP) and blockchain initiatives.
«Along with other emerging technologies like artificial intelligence, the Chinese government has identified blockchain technology development as an issue of national importance. We believe the imminent launch of DCEP and the ongoing rollout of blockchain networks should further support China's global technology ascent.»
Amongst the benefits of the DCEP is accelerated digital penetration, according to UBS underlining China as the leading home (13 percent) of the 2 billion unbanked individuals globally. Other major benefits highlighted include improved currency supervision, such as better controls against corruption or money laundering, and reduced cost associated with physical cash.
Investment Opportunities
In light of the developments, the report highlights three major areas for investment opportunities. Firstly, UBS expects the industry status quo to experience no material change in the short-term leading to preferences for existing internet leaders like Alibaba, Tencent and retail banks like China.
Secondly, despite the lack of near-term impact, ongoing national digitalization is expected to provide support to the broader digital market in areas such as intelligent infrastructure and smart city themes. Thirdly and finally, China’s acceleration is expected to trigger more innovation in the global fintech market with industry leaders like Visa and PayPal expected to enhance their capabilities to compete.
«The rising tide of accelerating fintech industry innovation should benefit key stakeholders in the near term,» the report added. «However, these developments should be closely monitored as further changes may dislocate the industry's current status quo.»
