World starts to worry as Chinese economy hiccups

As we discussed in class, the government can affect monetary policies through open market operations (buying and selling of bonds to affect money supply), reserve ratio (can increase or decrease money supply)and the discount rate (inter-bank lending interest rate) to help stimulate the economy. This article emphasizes this belief by stating that if the Chinese government can “control the downturn... and the domestic situation doesn't get out of control, it won't be so bad”. Furthermore, the weakening economy is discouraging investment as firms are imposing tighter credit conditions which is leading to a slowdown in manufacturing. This article is both a scream for help as well as a cautionary note to the world highlighting the dangers of an increasingly global and interdependent economy.

http://www.npr.org/2011/12/02/143048898/world-starts-to-worry-as-chinese-economy-hiccups

- Posted by Mehul Jain