Economics

china has sustained an economical growth of 11 .9 per family for a long time already - a phenomenon some(prenominal) economists would think of as impossible Furthermore , China is further more important to the world economy today than some(prenominal) ecstasys ago . China `is now contributing more to world(prenominal) GDP growth (measured at grocery exchange pass judgment ) than the United States is (The Economist , 2007 , para .2While in the past most countries looked at the economic performance of the U .S . to determine forthcoming tr dyings of the world economy . Given the recent changes , it is necessary to payoff into account both the U .S . and China . While the U .S . faces certain economic challenges associated with a slowdown of the housing market that might clobber consumer spending China s slopped economic growth becomes a prerequisite to global economic stabilityOne of the fast threats is posed by inflation , as it frequently occurs downstairs the scenario of overheating of economy . This August inflation of consumer prices has been the highest in the decade . Yet the situation is not as gloomy as in 1988 and 1994 moreover , galloping inflation can be attributed to an append in victuals prices to the supply side rather than acquire side , like it was with previous inflation c vacates . Inflation rank for other products but food are fairly steady Yet darn food remains to constitute troika of the inflation basket social disturbances might follow if prices rise even higher . The article argues that this caper can be fixed by increasing reside rates while the central bank has done it already five multiplication this year , the tempo of economic growth exceeds the incremental interest rate s increasesThe government s response to widespread fears of inflation was to block off certain prices (e .g . of oil , electricity and water ) till the end of the year . The article argues that China might have dealt with the problem in a better way by permit yuan rise freely .

Among the possible positive consequences of such(prenominal) policy are a decrease in prices of food and raw materials and a slowdown of liquidity build-up . The World shore reports that China has exceeded its potential growth rate in the origin half of 2007 . However , the problem is not as liberal as it used to be during previous decadesAnother danger is associated with the bursting of China s stock market bubble , given the rapid mickle in share prices coupled with price-earnings ratios as high as 50 . However , the threat is not imminent : with Nikkei and NASDAQ indexes , price-earnings ratios surpassed coke at their highest points . Furthermore , even if the prices collapsed , the growth would remain insensible(p) , as value of tradable shares accounts for humble 35 of GDP . The kin between share prices and cost of capital might be affected , but not so many Chinese firms rely on internal financeA major fear is that if rectitude prices dip , banks might become less willing to transmit . It is a common practice in China to overwhelm loans as mortgages to...If you want to get a full essay, order it on our website: Ordercustompaper.com

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