China Uses Blockchain to Mitigate Coronavirus Damage

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With the coronavirus outbreak, China has been forced to delegate close to 80 billion dollars in funds in attempts to control the spread of the virus. However, possibly the most damaging economic fallout from the coronavirus is it’s impact on the small to medium sized businesses that make up over half of China’s economic power. With Chinese businesses under an inordinate amount of pressure from the virus outbreak, stemming from loss of employees, mandated extension of holidays, and other friction, the flaws experienced in Chinese business practices are becoming even more threatening. In general, many businesses in China feel distrust towards fellow companies as they struggle with data sharing, verification inefficiency, and more. In attempts to mitigate the economic friction caused from damaging Chinese business practices being brought to the forefront in combination with the economic duress from the virus outbreak, China has developed and begun to implement a blockchain system to lend out cross-border loans to small businesses across the nation. According to China’s State Administration of Foreign Exchange, since the introduction of the blockchain system last March, around 16 billion dollars worth of loans have been processed through the system. During the coronavirus period, 87 businesses have received over 250 million dollars in support through this blockchain system.

The benefits of the blockchain system is potentially enormous, as it allows for extremely efficient processing of foreign currencies, and inherently grants the ability to record and retrieve virtual ledgers of recorded payments, allowing for fraud to be quickly identified. China is hopeful that their blockchain system will be able to help fix the short term economic pains caused by the coronavirus and the long term issues presented by current Chinese business practices.

Keith Knutsson of Integrale Advisors commented that, “The blockchain system implemented by China might not only solve some of their temporary issues, but could be a glimpse into the future of economies.”

US-China Sign Phase 1 Deal

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On Wednesday, President Trump officially signed the Phase 1 Deal at the White House, taking the first major step in reducing trade tensions with China. In summary, the trade deal focused on increasing Chinese expenditure on American goods, reducing theft of American corporate technology, and eliminating currency manipulation. By signing this agreement both countries are notably making an effort to cooperate and reduce the economic strain felt by both countries and the world. Although the results of the agreement do not solve many of the important issues that the United States has with China politically, such as cyberattacks on American companies, Trump claims a Phase 2 deal will remedy these problems and strengthen our relationship with China. There is no specific date set for Phase 2 negotiations to begin, but based on activity from both governing bodies, Phase 2 discussions will not be until after elections.

Despite the low feasibility of a Phase 2 agreement being signed soon, the Phase 1 Deal already cements a good foundation for establishing fair trade between the two countries and ending the internationally damaging trade war. Chinese President Xi Jinping stated that the Phase 1 deal is “beneficial to both China, the U.S. — and the world,” showing the desire of China and the U.S. to cooperate as partners to globally release the economic strain that the trade war as caused. Although there are many critics of the Phase 1 Deal, pegging it as “underwhelming,” it positions both the US and China extremely well to resolve many long lasting problems in their political and economic ties.

Keith Knutsson of Integrale Advisors commented that, “The Phase 1
Deal represents hope for future negotiations that can not only generate greater wealth in China and the United States, but inherently help the world as well.”

German Economic Growth

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In 2017, Germany’s economy grew at the fastest annual pace in nearly a decade. As a result, this is a large contribution to the pickup in growth across the eurozone.

According to the German National Statistics Office, GDP (gross domestic product) grew 2.2% last year, after analysts expected growth of 2.3%. Nevertheless, it was the fastest pace of growth recorded since 2011.

Germany’s strong performance feeds into the success of the eurozone. On Tuesday, the World Bank estimated the EU’s economy grew 2.4% in 2017, which would be its strongest performance since 2007. The expectation is that Germany’s positive growth and momentum will continue in the current year. Trade played a big role in the growth: imports grew 5.2%, exports were up 4.7%.

“Looking to the future, the fundamental factors that supported growth in 2016 and 2017, such as rising industrial production and larger demand for real estate, should still be in place in 2018” said Keith Knutsson of Integrale Advisors.

The recent pickup in growth across the eurozone has made policy makers at the European Central Bank more confident that they will reach their inflation target over the next couple of years. The central bank is decreasing monthly bond purchases under the quantitative easing program from €60 billion from €30 billion.

The acceleration in growth has been fueled in part by a rise in business investment, with Germany seeing a 3.5% rise in spending on domestic plant and machinery in 2017. Eurozone industrial production was 1% higher than in October, and 3.2% higher than in November of 2016. As a result, Germany remains the Eurozone’s manufacturing powerhouse.