While the capital markets are waiting for a U.S.-China trade deal to present itself, there are other ways to capitalize on the Chinese economy and one way is through the growing adoption of blockchain technology via the Reality Shares Nasdaq NexGen Economy China ETF (NasdaqGM: BCNA).
Chinese E-commerce giant Alibaba is one of the major movers and shakers who are adopting more uses for blockchain, which is the underlying technology responsible for cryptocurrencies like Bitcoin. As financial technologies become more robust, Alibaba is adjusting with the times through its payment arm Ant Financials
Ant Financials is launching a pair of blockchain affiliates–Ant Blockchain Technology and Ant Double Chain Technology in the district of Huangpu in Shanghai. Ant Blockchain Technology will focus its efforts on software development, big data, consulting, and a plethora of other areas while Ant Double Chain Technology is looking at the financial information services space, as well as supply chain management.
The move comes after Alibaba’s latest efforts to obtain blockchain patents for areas, such as invention, design and utility. Out of the 406 blockchain patents in 2017, Alibaba was second only to the People’s Republic of China–combined, both account for 27 percent of the blockchain patents.
“We are the most patented company in the world of blockchain technology,” said Jing Xiandong, Ant Financial CEO.
BCNA seeks long-term growth by tracking the investment returns of the Reality Shares Nasdaq Blockchain China Index, which is comprised of blockchain-related companies located in Hong Kong and mainland China. The index is designed to measure the returns of companies that invest in or utilize blockchain technology.
BCNA is experiencing explosive growth thus far with gains of 24.61 percent year-to-date according to Morningstar performance numbers.
“China is quickly becoming a global epicenter for blockchain innovation. In 2017, the nation filed for more blockchain-related patents than any other country in the world1, and the Chinese government recently endorsed blockchain technology as an economic ‘breakthrough,’” said Eric Ervin, CEO of Reality Shares in a press release. “China’s blockchain industry presents an incredibly exciting and long-term investment opportunity, and through BCNA, investors can now easily access this emergent market.”
Asia Leading the Blockchain Revolution
Furthermore, blockchain experts are expecting Asia to lead the charge in blockchain technology with new developments in the making, according to 500 Startups Partner Edith Yeung. One area in particular is in payment processing.
“Many developing countries, where just to start with they don’t even have credit cards, there’s no particular infrastructure, it’s almost easier to see sort of blockchain-enabled payments, to see in Asia, you will see more action happening in Asia more than U.S. and Europe,” said Yeung.
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Ripple CEO Garlinghouse is anticipating more widespread adoption of blockchain in the next five years. However, Hutchins said the primary focus of consumers will be the results that blockchain delivers as opposed to the technology itself.
“When you send an email out today, you don’t think about the underlying technology you are using … So you can hear us talk about … what protocol, what token, what technology solutions, how many transactions per second, but eventually what’s going to happen is you are going to put something of value in, something of value will come out the other side and you are not going to care what the underlying technology is,” said Hutchins.
“And that’s when you know we’re successful,” he added.
China already boasts a “blockchain wall” that consists of the following ecosystem:
- Institutional investors with ties to major corporations
- A network of universities and thinktanks that facilitate the growth of blockchain initiatives
- A dynamic financial environment combined with quick-to-respond regulatory implementation
More Foreign Investment
Additionally, China is becoming less resistant to safeguarding its businesses, which will open the pathways to more foreign investment that could also flow into blockchain technologies. Forbes reported this week that Chinese officials are meeting to discuss which sectors to give access to foreign investors.
China ETFs have also been the beneficiaries of index provider MSCI Inc. announcing recently that it would quadruple its weighting of large-cap Chinese shares in its benchmark indexes. In a press release, MSCI Inc. said it would increase the weight of China A shares in the MSCI Indexes by increasing the inclusion factor from 5% to 20% in three steps.
The decision came after an extensive global consultation with a large number of international institutional investors, including asset owners, asset managers, broker/dealers and other market participants worldwide. MSCI said the proposal to increase the weight of China A shares garnered overwhelming support from investors.
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