- Deutsche Bank has referred to China’s rapid AI progress as its ‘Sputnik moment,’ likening it to the shock of the Soviet Union’s first satellite launch, which marked a global technological shift.
- Crypto activity continues in China through alternative channels, with Hong Kong recently approving spot Bitcoin and Ethereum ETFs, signaling a shift in China’s stance on digital assets.
Deutsche Bank AG, one of the world’s leading financial services providers based in Germany, has described China’s advancements in artificial intelligence (AI) as a moment that could reshape global technological competition. Drawing a parallel to the Soviet Union’s launch of Sputnik in 1957, which shocked the world and marked the beginning of the space race, the bank has dubbed China’s AI developments its own “Sputnik moment.”
This transformation is highlighted by the rise of AI chatbots like DeepSeek, which recently wiped out over $1 trillion from the global stock market, underscoring China’s growing influence in technology.
Deutsche Bank emphasized, “2025 is seen as the year the investment community realizes China’s leading position in global competition. It is becoming increasingly difficult to deny that Chinese companies offer high cost-performance and quality products in various manufacturing and service sectors.”
This observation underscores that China’s technological rise has reached a tipping point, where it can no longer be dismissed as a challenger but must be recognized as a global leader. Chinese companies are becoming front-runners in multiple industries, offering high-quality, cost-effective solutions across manufacturing and advanced services, making them increasingly attractive to investors.
One of the most significant implications of China’s rise, according to Deutsche Bank, is the anticipated shift in how investors view Chinese stocks. Historically, concerns about governance, regulatory frameworks, and political risks have led to a “valuation discount” for Chinese companies. However, Deutsche Bank now expects these concerns to diminish as China’s technological capabilities grow, supported by policy shifts aimed at boosting investor confidence.
“We expect the ‘valuation discount’ of Chinese stocks to disappear, and profitability may exceed expectations due to policy support for consumption and financial liberalization. The bull market in Hong Kong/A-shares began in 2024 and is expected to surpass previous highs in the medium term.” This forecast suggests that Chinese stocks will become increasingly attractive to global investors as China’s market fundamentals improve, driven by its expanding tech capabilities and supportive policy measures.
Could China Lead the Way in Crypto Adoption?
While China’s technological advancements continue to gain momentum, another area of interest is its stance on cryptocurrency. Since 2017, China has enforced restrictions on crypto, banning exchanges and later cracking down on crypto mining and financial institutions dealing with digital assets. Despite the government’s strict controls, underground crypto trading persists, and China ranked 20th in the 2024 Chainalysis Global Crypto Adoption Index.
Simultaneously, China has been positioning itself as a leader in the realm of central bank digital currencies (CBDCs). Through the rollout of its digital yuan pilot programs, China has made significant strides in integrating a state-controlled digital currency into its broader financial ecosystem. On December 31, 2024, China again tightened its crypto regulations, instructing foreign exchange regulators to flag all cross-border crypto transactions.
In contrast, Singapore issued 13 crypto licenses to leading exchanges such as OKX and Upbit, as well as global players like Anchorage, BitGo, and GSR, more than doubling the number of licenses granted the previous year. Meanwhile, Hong Kong has been slower to establish its own regulatory framework, leaving room for speculation on whether China might pivot toward a more open approach to digital currencies, possibly inspired by its success in AI and tech.
There is hope that Hong Kong’s recent approval of spot Bitcoin and Ethereum ETFs, along with efforts to develop a Bitcoin reserve, could signal a turning point. These funds have already attracted investments from mainland China, indicating growing institutional interest in crypto despite regulatory challenges.
