China's economy slowly recovering, will this last?

Dear TFH member,

We trust you had a splendid weekend!

Here’s what you need to know about the past week in four headlines:

Before then:

A Snapshot of the Markets last week:

Data as of [04/07 2022]

Here are the headlines:

1.??????China’s economy slowly recovers from Covid effects

2.??????The Russia and Ukraine war and its effects on development finance

3.??????The Crypto Winter persists

4.??????AI still cannot patent inventions

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GLOBAL TRADE

Welcome back, China

After some months of slow growth due to Covid-19 lockdowns, China’s economy is?steadily recovering.?This past week, the Manufacturing Purchasing Managers’ Index (PMI), an economic indicator of business activity, showed a positive improvement by recording 50.2 points from 49.6, bypassing the 50-mark. The non-manufacturing or the service sectors – comprising the retail and hospitality sector – ‘s (PMI) recorded growth as well, by increasing to 54.7 points from 47.8 in May.

Financial analysts have viewed this as good news and expect further improvement. This improvement came on the back of the ease of the restrictions in major Chinese cities, particularly Shanghai, the world’s largest port. For more than 2 months, Shanghai, a major Chinese manufacturing hub that?accounts?for 3.8% of China's GDP and 20% of China’s global trade since 2018 has been on lockdown. This measure also?led?to a contraction of the Chinese economy, making the country miss growth forecasts for the year.

Also, the manufacturing and supply chain gaps caused by the restrictions contributed to the inflationary pressures on the global economy. Particularly, the supply chains of big companies such as Tesla and Apple have been impacted by this lockdown.

Will this last?

China still has the?zero-covid policy, a policy that involves beating Covid completely to the last patient. And it is ready to take some blows to its economy to achieve that. With this zero covid policy, it is uncertain whether this momentum can be sustained. Indeed, only covid will tell.

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GLOBAL FINANCE

Russia- Ukraine war and sustainable development finance

The war between Ukraine and Russia could widen the $3.6 trillion annual gap in financing required to achieve sustainable development goals and worsen the debt burden in many developing countries.

New estimates from the United Nations Conference on Trade and Development (UNCTAD) reveal that the gap in financing required to achieve SDGs, such as ending global poverty and stopping climate change, is now at $17.9 trillion for the period of 2020-2025. This puts the current annual gap at?about $3.6 trillion?– more than $1 trillion wider than it was before the COVID-19 pandemic – without yet factoring in the effects of the Ukraine conflict.

The $17.9 trillion figure is most likely an underestimate, Ms. Grynspan, the UNCTAD’s secretary-general revealed because the calculations were done prior to the start of the war in Ukraine in late February. The war’s impact on government spending around the world will put further pressure on aid budgets, which were already low.

Capital flight and less development assistance would create immense stress for many developing countries already struggling with high debt levels. Increased credit downgrades and debt defaults could be on the horizon. Not too long ago, Fitch Ratings changed the rating of Nigeria’s debt instruments.

In 2020, debt-to-GDP ratios in developing?countries rose from 57% to 69%.?For these countries, about 16% of export earnings are spent on paying debts.

Urgent action needed

Emergency financial measures are now imperative to keep the gap from becoming an abyss. UNCTAD is now calling for emergency measures and efforts to help support sustainable growth, as climate change, poverty, and other various crises are hitting developing countries hardest and making it harder for them to achieve the Sustainable Development Goals (SDGs).

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CRYPTOCURRENCY

The crypto winter persists

Winter is still yet over for the?house of crypto?as prices of coins are still unstable while news reveals that many Crypto Exchanges have gone ‘secretly insolvent’. This past week, another one bit the dust.

A prominent crypto hedge fund named Three Arrows Capital has defaulted on a loan worth over $670 million. A Digital asset brokerage Voyager Digital came forward and?issued a notice on Monday morning, saying that the fund failed to repay a loan of about $350 million in the dollar-pegged stablecoin,?USDC, and 15,250?bitcoin, worth around $323 million in today’s prices.

3AC’s insolvency comes after weeks of turmoil in the crypto market, which has wiped off hundreds of billions of dollars in value. As it stands, the overall crypto market cap sits at about $950 billion, down from around $3 trillion at its peak in November 2021.

According to?Sam Bankman-Fried?the crypto billionaire and founder of exchange FTX, the crypto exchange market has already slid far further than many executives are willing to admit. In other words, the crypto market is doing even worse than we might think.

?The value of Bitcoin has been plummeting this year, erasing over 200 billion off the crypto market in a?single day earlier last month.

Meanwhile, crypto lenders are facing serious?class-action lawsuits,?laying off thousands?of workers,?halting withdrawals?— and even?closing down?altogether. To worsen matters, the crypto industry is operating within a?relatively new terrain, making them particularly vulnerable to hacks and scams. There is currently a $100,000 reward for?finding?the missing ‘cryptoqueen’, a Bulgarian woman who orchestrated a $4bn cryptocurrency scam through the OneCoin.

While the future of crypto is still shrouded in mystery, some experts believe that crypto markets will still bounce back from the current crash in the next couple of months. It remains to be seen whether a full recovery would be made.

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TECH

AI still cannot patent inventions

Last week, the Intellectual Property Office of the United Kingdom through its?consultation?made it clear that Artificial Intelligence – what we know as AI – cannot patent inventions. This decision was based on a UK Court of Appeal decision in September, last year that only a person can own the right to a patent.

A patent is a type of intellectual property right that grants ownership and other exclusive rights to the creator of that invention. A grant of patent over an invention grants the owner of that invention the right to exploit the use of the invention for commercial purposes. The?controversy?comes up when applying for a patent and an AI system is named as the inventor or creation of the invention.

The line is not that fine

There is still a lack of clarity on how to view granting patent rights to AI. And there are different decisions by courts in different decisions on whether an AI can be said to actually be an owner of an invention.

From the economic perspective, granting patents to AI incentivize more investment in AI technology. However, there is a legal concern with respect to the origins of ownership. In the nearest future, we expect to see further regulatory directions on how an AI system can patent invention.

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Till we see again next week,

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