Saxo Bank’s ‘Shocking Predictions’: the digital yuan will unlock China’s capital markets

The digital version of the yuan (DCEP) on the blockchain will in 2021 trigger tectonic shifts in global financial flows, opening China’s domestic capital markets to foreign investors. This view was voiced by Saxo Bank analysts in the annual ‘Shocking Predictions’.

After an outrageous year, it’s time for some Outrageous Predictions. Watch @Steen_Jakobsen introduce Saxo’s contrarian market forecasts for 2021. https://t.co/7lHw3BcTti

Trading financial instruments carries risks. Always ensure that you understand these risks before trading. pic.twitter.com/cTE5XS5A0t

— Saxo Bank (@saxobank) December 8, 2020

They contend that a natural step by the People’s Bank of China for the digital currency would be to open the country’s capital-account, which currently has tight restrictions and makes the yuan virtually unavailable outside the mainland.

“Providing foreigners with full access to Chinese capital markets will reduce the main barrier that concerns foreign investors in using the yuan for trade and investment: its liquidity and direct access to their investments within the country,” — noted the bank’s analysts.

In addition, the stability of the Chinese currency, the traceability and control provided by blockchain technology will virtually eliminate the risk of capital flight or illicit transfers from the country, they added.

In the analysts’ view, this idea fits well within China’s proclaimed стратегии двойного обращения (Dual Circulation), increasing transparency domestically while expanding the yuan’s use worldwide as a credible alternative to the US dollar for transactions.

Opening capital accounts and creating a currency competing with the dollar for reserve status would help boost domestic consumption, finance a completely new pension system in China, and deepen the country’s capital markets, the Saxo Bank analysts concluded.

How China managed to become a leader in monetary innovation thanks to the digital yuan (DCEP)

Analysts describe their traditional forecasts for the coming year as “incredible” and “outrageous” that do not reflect their official stance. Among other “shocking” predictions for 2021, they list Amazon’s move of its headquarters to Cyprus, and a rise in corporate defaults due to successful COVID-19 vaccination.

Earlier in 2020, the “Shocking Predictions” forecast the Asian Infrastructure Investment Bank issuing a new blockchain-based reserve asset named ADR and a waning interest in AI developments.

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