Comments on: Walking the fine line between good growth and bad growth in China http://welkerswikinomics.com/blog/2008/03/06/walking-the-fine-line-between-good-growth-and-bad-growth-in-china/ for students and teachers of AP and IB Economics Sat, 22 Nov 2008 04:55:41 +0000 http://wordpress.org/?v=2.6.3 By: Chan Min Park http://welkerswikinomics.com/blog/2008/03/06/walking-the-fine-line-between-good-growth-and-bad-growth-in-china/#comment-4465 Chan Min Park Sat, 15 Mar 2008 14:47:40 +0000 http://welkerswikinomics.com/blog/2008/03/06/walking-the-fine-line-between-good-growth-and-bad-growth-in-china/#comment-4465 As consumption and net exports continuously increase, demand continuously shifts outwards and there will be tremendous inflation. Your engine overheats and in the beginning it may seem as if its okay but if you leave it like that and it keeps overheating, its going to cause a big problem. Therefore it is important to see the line between good growth and bad overheated growth. Investment and better capital could increase the performance of the engine. Increasing consumpton and net exports can help growth but at the same time productivity and investment needs to increase to keep the inflation level in control. As consumption and net exports continuously increase, demand continuously shifts outwards and there will be tremendous inflation. Your engine overheats and in the beginning it may seem as if its okay but if you leave it like that and it keeps overheating, its going to cause a big problem. Therefore it is important to see the line between good growth and bad overheated growth. Investment and better capital could increase the performance of the engine. Increasing consumpton and net exports can help growth but at the same time productivity and investment needs to increase to keep the inflation level in control.

]]> By: James Tsao http://welkerswikinomics.com/blog/2008/03/06/walking-the-fine-line-between-good-growth-and-bad-growth-in-china/#comment-4425 James Tsao Sun, 09 Mar 2008 14:26:16 +0000 http://welkerswikinomics.com/blog/2008/03/06/walking-the-fine-line-between-good-growth-and-bad-growth-in-china/#comment-4425 Great Comparison with the Jeep. Inflation would be detrimental to China's economy especially because China is exporting such a significant amount of its goods. I can see if the government fosters investment and productivity growth in the agricultural sector, AS can rise and keep in pace with the rise in AD to keep food prices low. Yet, if the government spending/regulation is inefficient the end result might be that AD rises by a greater proportion than AS since government spending and investment is part of AD. Personally, I don't think government spending would help the crisis all that much because the agricultural sector in China is so big and diverse. Unlike the industrial sector, the agricultural sector is more spread out and therefore harder to invest upon. Even if productivity was somehow increased, it is hard to make sure that the excess supply is of good quality. Great Comparison with the Jeep. Inflation would be detrimental to China’s economy especially because China is exporting such a significant amount of its goods. I can see if the government fosters investment and productivity growth in the agricultural sector, AS can rise and keep in pace with the rise in AD to keep food prices low. Yet, if the government spending/regulation is inefficient the end result might be that AD rises by a greater proportion than AS since government spending and investment is part of AD. Personally, I don’t think government spending would help the crisis all that much because the agricultural sector in China is so big and diverse. Unlike the industrial sector, the agricultural sector is more spread out and therefore harder to invest upon. Even if productivity was somehow increased, it is hard to make sure that the excess supply is of good quality.

]]> By: kxc.024 http://welkerswikinomics.com/blog/2008/03/06/walking-the-fine-line-between-good-growth-and-bad-growth-in-china/#comment-4416 kxc.024 Sat, 08 Mar 2008 04:28:12 +0000 http://welkerswikinomics.com/blog/2008/03/06/walking-the-fine-line-between-good-growth-and-bad-growth-in-china/#comment-4416 Unfortunately, growth and inflation often go hand in hand. In the case of China, inflation seems to be an increasingly serious problem. Especially now that many businesses are coming into China for investment (although not as much as China would like), a lot of rural people have abandoned their villages and fields for a higher paying job. Problem now is that agriculture is the main source of rising price levels, due to demand-pull inflation. Therefore, their measure of expanding the agricultural section through subsidies is a great idea. Hopefully, this will help lower the price level or at least the rate of inflation for the people. On the other hand, while inflation is a serious problem, it is less of a problem in China than in other countries, such as the USA. I think this is due to the fact that there is a huge emerging middle class in China and it is only recently that they've begun to have a significantly larger amount of income to spend, so an increase in the price level is not as bad. Unfortunately, growth and inflation often go hand in hand. In the case of China, inflation seems to be an increasingly serious problem. Especially now that many businesses are coming into China for investment (although not as much as China would like), a lot of rural people have abandoned their villages and fields for a higher paying job. Problem now is that agriculture is the main source of rising price levels, due to demand-pull inflation. Therefore, their measure of expanding the agricultural section through subsidies is a great idea. Hopefully, this will help lower the price level or at least the rate of inflation for the people.

On the other hand, while inflation is a serious problem, it is less of a problem in China than in other countries, such as the USA. I think this is due to the fact that there is a huge emerging middle class in China and it is only recently that they’ve begun to have a significantly larger amount of income to spend, so an increase in the price level is not as bad.

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