The Apprentice's First class: China's ongoing trend of overheating

Tonight was the first meeting of the ‘Apprentice’ business English discussion class. Our topic for the first meeting was China’s ongoing trend of overheating. We explored the causes of what goes into overheating a country’s economy and which of those elements were present in China’s +11.7% GDP market. We explored what the current 3.7 % inflation rate (predicted to rise to 4% or even as high as 5%) was doing to the economy of China and its effects not only on China’s own people in terms of daily living, but also downstream- higher prices at home and higher labor costs due to the impending labor shortage (Is that possible? It’s China! 1.3 billion people…) translating to higher prices on exported products.

We then looked at what governments usually do to cool off overheating such as raise the lending interest rates and control runaway investing in real estate which artificially pushes up property values. Also discussed was the effect of the manipulation of the Yuan by the government. What would happen if the Yuan were appreciated? Ripple effects across the country and around the world would be felt. Current non-performing loans (one out of two- or almost 50%) are a major risk area for an implosion of the bubble. The US trade deficit with China would widen.

Later we discussed the impact of the rush, the herding, to China: Taiwan’s loss of skilled managers to the call of the siren; the effects of factory closings and unemployment here at home.