Why China’s Economic Slowdown Could Trigger a Full-Blown Global Recession

By CCN.com: According to new figures from the International Monetary Fund (IMF), the European Central Bank (ECB), and the Chinese government, Europe and China are continuing to struggle following a poor year of growth in 2018.

ECB President Mario Draghi said on January 24 that downside economic risks could pose a threat on the economy of the euro-zone, citing geopolitical uncertainties, the U.S.-China trade war, and the volatility in the global financial market as major contributing factors.

China and Europe Slowdown May Lead to a Global Recession

Earlier this month, a market strategist Russel Napier wrote in a column that the demise of the euro could trigger the collapse of the global monetary system, resulting in a full-blown global recession.

Napier said:

“The key consequence of this collapse will be the destruction of the euro. The expected success of the far-right and far-left in the European parliamentary election in May this year augurs the beginning of the end for the currency union. Both extremes share a commitment to the return of sovereignty to their parliaments that is incompatible with a single currency.”

In an official speech, ECB President Mario Draghi acknowledged the decline in the momentum of the euro and the euro-zone economy on Thursday, stating that the central bank will have to establish new inflation and economic forecasts by the end of the first quarter of 2019.

Draghi emphasized that a wide range of instruments such as bonds, interest rates, and long-term loans could be utilized to stimulate the euro-zone economy. But, analysts remain unconvinced whether it would be sufficient to lead to the euro-zone to a full recovery by the year’s end.

An economics commentator Greg Ip noted that based on the numbers released by the IMF, which suggest that the global economy is set to expand by 3.5 percent in 2019, a global recession will not occur in the short-term.

However, Ip explained that the series of revisions made by the IMF in its forecasts and projections present an issue for central banks across the world and depending on the strategies employed by major regions like the euro-zone and China, the global economy may face long-lasting turbulence throughout the years to come.

“This latest disappointment isn’t the story; the real story is the serial disappointments that have dogged this expansion from the start. The IMF keeps projecting a return to the 4%-plus growth that prevailed in the 2000s, and keeps having to revise it down,” Ip wrote.

The slow down in the growth rate of the European economy coincides with the newly released report from the Chinese government that the economy of China grew by a mere 6.6 percent in 2018, recording the slowest pace in over two decades.

U.S. Economic Growth is on the Decline as Well

Several reports in the past week have claimed that the struggle of the euro-zone and China may affect the economy of the U.S. in the short-term.

Already, as disclosed by the Conference Board economic research director Ataman Ozyildirim, U.S. economic growth is projected to slow down by the end of the year, having recorded a slight drop in the last quarter of 2018.

Since late December, major stock market indexes including Dow Jones, S&P 500, SSE Composite, and Nikkei 225 have performed relatively well, but analysts believe that the global economy remains vulnerable to a potential downturn and trend reversal.


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Author: Joseph Young 
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Bank of China uses blockchain technology to combat poverty in Tibet

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According to a survey conducted by the World Bank in 2015, more than 700 million people are living without sufficient money to fulfill their basic necessities or afford a considerably comfortable in a society like in the modern world. In the year 1990, the number of people who lived in poverty was close to 1.75 billion.

One of the largest state-owned banks in China, Bank of china [BoC] has announced that the bank is going to irradiate poverty with a mighty weapon called blockchain technology in the Southwest China Tibet Autonomous Region. Bank of China is going to integrate Blockchain technology to upgrade the existing cloud-based system of the bank’s poverty reduction fund.



Blockchain technology is going to be used in security verification of the bank’s transactions, information access, file transfer and subsequent allocation of the funds, the current cloud-based system enables the project management team to process the fund application for the fight against poverty. Blockchain technology will provide a multi-node network to easily stay connected with the partners of the bank and other fund applicants.

They are planning similar projects in poverty affected provinces like Gansu, Yunan and Qinghai. Tibet’s regional poverty relief office has said that around 330,000 people are in poverty which is about 12.4% of the total population.

The government of China has allocated $2.6 billion for the fight against poverty, which would be used by more than 1,700 anti-poverty projects to relocate and help increase the income of the people.

Even though the Chinese government’s contempt of cryptocurrency has not extended to blockchain technology which supports the tokens, China is implementing blockchain technology in various industries like financial sector, record keeping, transportation, food safety, and tracking. China is leading the global pack in terms of the number of blockchain patents being filed. The government has allocated millions of dollars for the research and growth of blockchain technology inside the country.


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Author: Arjun B
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Should the West suspect Chinese tech?

Both the US and UK have issued warnings about the Chinese technology and telecoms giant ZTE.

The decision by the US Commerce Department to ban American firms from selling equipment to ZTE for the next seven years dates back to a case from a few years ago, when ZTE was accused by the US government of violating sanctions against Iran.

At the time, the US said if ZTE refused to comply, there would be consequences.
This week, the US made good on those threats and is hitting ZTE where it hurts.

A shortage of US components is likely to cause ZTE to miss shipment deadlines and lose orders, according to investment firm Jefferies. It has cut its estimates for ZTE sales by 13.5% in 2018 and 7.6% in 2019.

ZTE’s chairman Yin Yimin has reportedly said this is a “crisis” and called for his 80,000 strong staff to remain calm, according to a leaked memo seen by the South China Morning Post.

And it’s not just the US.

In a seemingly unrelated case, the UK on Monday warned companies about doing business with ZTE, saying its cyber-defence watchdog has blacklisted the Chinese firm over concerns of national security.

Granted, these are two different issues, but the incidents highlight one glaring fact: the West is increasingly suspicious of Chinese tech.

That suspicion is complicated by the current “geopolitical tension”, says Chris DeAngelis of the ADG group in Beijing.

Regardless of whether there is truth to the national security concerns, the real issue, he says, is that the US and the UK want to ensure the survival of their own firms that compete with ZTE.

The geopolitical tension Mr DeAngelis is referring to is the ongoing trade row between the US and China.

At the heart of this spat, as I’ve said before, is that the US says China forced American companies that wanted access to low-cost labour and the massive market to tie up with Chinese companies – in effect allowing them to copy and steal American ideas.

China says that’s not true, and Beijing has been very vocal about the way it perceives its firms are being treated by the West.

China’s Ministry of Commerce has urged the United States to “create fair, just, and stable legal and policy environment for Chinese companies”, with regards to the ZTE decision.

And perhaps more notably, it also said it was prepared to take action to protect the interests of Chinese firms.

ZTE is not the only Chinese tech firm that’s been targeted by the West.
China’s Huawei, for example, has been blocked from striking a deal to sell its new smartphone via a US carrier over security concerns.

And Singapore’s Broadcom had its bid to takeover Qualcomm blocked because of US national security concerns that specifically cited Huawei and Chinese technology.

At the crux of this is a suspicion that Chinese companies are the eyes and ears of the Chinese government in Western markets.

Whether those suspicions are warranted is hard to prove, but “there is no question that telecom and communications is a valid security risk”, Mr DeAngelis told me.
“If you have a problem in a network, do you really want to rely on your vendor if you are in the middle of a trade war, for example?” he said.

And perhaps more notably, it also said it was prepared to take action to protect the interests of Chinese firms.

ZTE is not the only Chinese tech firm that’s been targeted by the West.
China’s Huawei, for example, has been blocked from striking a deal to sell its new smartphone via a US carrier over security concerns.

And Singapore’s Broadcom had its bid to takeover Qualcomm blocked because of US national security concerns that specifically cited Huawei and Chinese technology.

At the crux of this is a suspicion that Chinese companies are the eyes and ears of the Chinese government in Western markets.

Whether those suspicions are warranted is hard to prove, but “there is no question that telecom and communications is a valid security risk”, Mr DeAngelis told me.

“If you have a problem in a network, do you really want to rely on your vendor if you are in the middle of a trade war, for example?” he said.

Recently, Chinese firms have also beaten global firms in China, as ride-hailing giant Didi Chuxing proved recently by driving Uber out.

Some say the West’s fear originates in envy and an ignorance of just how hard Chinese firms can make their staff work.

“Unless people have seen the Chinese tech culture known as 996, they don’t understand Chinese tech,” writes Lawrence Kuok in supchina.com.

(The number 996 refers to the Chinese tech firms’ practice of working from 9am to 9pm, six days a week.)

“What I think a lot of people don’t understand about the Chinese market is that there are many aspects that require pure and utter hard work,” he said.

Chinese tech firms do get help from their government, in the form of protection of the domestic market, which has allowed them to grow and dominate in China.

That’s not to say they’re not formidable players in their own right, though.

“No road that leads to a bright future is straight,” says ZTE’s Mr Yin in that leaked memo.

“The company’s internationalisation will also have its ups and downs… we will be stronger after weathering the storm.”


 

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author Karishma Vaswani 

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