~ China’s Feverish Growth May Demand Cooling ~

- Publication: The New York Times

- Author: Keith Bradsher- Date: April 17th 2006

Ka-Wing Yeung

5-18-2006

Summary

- China’s economy grew at 10.2% in the 1st Q in 2006 (highest record since 2003)

- Investment-led growth (easy lending from Chinese banks)

- Export-led growth (undervalued Chinese currency), →↑demand for Chinese goods & export

→↓demand for US’s goods & export →↑US trade deficit with China

Summary continued

- Further alarm the US, worried about job losses commodity prices

- Chinese government:

-- address its trade surplus by↑imports and domestic demand ,↓export tax rebates.

-- integrate corporate taxes paid by F and D firms

--↑interest rates

Summary continued

- Chinese government:

-- improve the protection of Intellectual Property

- Then the Yuan will be appreciated against the dollar at a faster rate.

Primary Problems:

China’s rapid growth & undervalued currency affect US’s economy, job losses and high commodity prices

Methods for Analyzing

Economic theory:

Law of Demand: ↓P →↑Q

Y = C + I + G + X – M

Article Evaluation:

- Did not explain why the protection of IP will help the appreciation

- Seems credible

My next paper:

Focus on the structure (or IO) of the banking industry in China.

--How will the banking reform improve “bad quality loan” problem and economic growth in China.