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Professor Stephen Nagy, Just Back from China – Thoughts and Analysis

Interview with Professor Stephen Nagy on the Trade War, China, Trump and Xi

Professor Stephen Nagy just returned from China where he conducted a series of speaking events with local and national officials. Naturally he was there as the Novel Coronavirus outbreak exploded, dominating Asian and international news services. Please read the below piece as it gives insight to what is really happening on the ground in China. You will not find this type of analysis in the mainstream media. It is a brilliant piece and we encourage you to send it to your friends.

Year of the Rat Black Rhino: Expect heavy hit to Chinese Economy
The Novel Coronavirus with its epicenter in Wuhan, China will be consequential for Chinese economy, global supply chains and in terms of the health impact and trust in local government in China.  Notwithstanding, the epidemic’s biggest victim will be China, not the developed world or late comers to the viral outbreak.

Key take homes:
1)  Developed and later comers to virus outbreak to quickly control outbreak through bottom-up and top-down measures 2) Virus will not get under control until early summer in China3) Local government, not Central government seen as problem4) Supply chains in China and in Wuhan area significantly affected5) Exodus of highly skilled6) Virus response to be a paradigm shift in telework culture 

Breakdown:–>Developed countries and latecomers to the virus will quickly control virus outbreak. Travel bans, quarantining of travelers from China, more robust health care systems, and transparent legal systems will ensure viral spread will be limited and quickly control. 
–>Developing states already benefiting from travel ban and quarantining of travelers with only a single death outside of China (including Hong Kong).  –>President Xi and the Party will be strengthened their draconian approach to quarantining Wuhan City and the Province of Hubei. Enforced and voluntary travel bans are seen by quotidian Chinese citizens as stern, needed and welcome temporary measures to stem the spread of the Coronavirus. 
–> Local leaders in Wuhan and Hubei under heavy criticism for their delayed response. Expect change, arrests, and imprisonment.
–> Wuhan is home to an automobile manufacturing, new hi-tech industries in places like the Optics Valley, and high-tech industries (including opto-electronic technology, pharmaceutical, biology engineering, new material industry, and environmental protection). These are all impacted by the quarantine, the exodus of highly skilled workers and the indefinite period of isolation. This will slow the Made in China 2025 if not make it much more difficult to achieve.
–> High tech sector and service sectors negatively affected indefinitely. Apple and other high tech firms have shute factors, services such as Starbucks shut indefinitely. Both represent industries current economy policies are focused on expanding as China transitions away from a manufacturing-heavy economy to high tech and services. 
–> Seen alongside negative impact of trade war, the overall slowdown in the economy do to structural issues (increasing costs of labor, demographics and local debt), the virus will exacerbate the downward trend making economic reform more difficult.
–> Coronavirus slowdown will impact Phase One Trade Deal making it difficult to achieve commitments. U.S. will return to tariffs and trade tension.

Expect:–> Supply changes to continue to migrate to Southeast Asia, South Asia, and Taiwan.–> Increased migration control to monitor and control the movement of people and indirectly capital.–> Big increases in spending in technology to identify health related social issues, technology to monitor the movement of people, and spending on vaccine development.–> Telework to become more prevalent in the region.–> Decline in tourism from China and to the region.



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