bai thuyet trinh ktvm phan 2

8/12/2019 Bai thuyet trinh KTVM phan 2

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B. ANALYSIS

I. Definition of overheating economy

Overheating of an economy isdefined as a phenomenon that

occurs when its productive

capacity is unable to keep pace

with growing aggregate demand. It

is generally characterized by an

above-trend rate of economic

growth, where growth is occurring

at an unsustainable rate. Boom

periods are often characterized by overheating in the economy.

II. Signs of overheating economy

In the history, some countries in the world dealt with overheating development of

economy such as U!, India, Brazil, "ussia# !t the moment, $hina is facing with this

situation. !lthough the government continuously insists that there is no sign of

overheating growth in $hina, the inde%s indices are against.

1. Inflation

$hina showed further signs of increasing prices as inflation rose to &.'( )O)

nen chu thich )O)*year over year+ de moi ng hieu in !pril versus &.( and

consensus &./(. 0owever,much of the increase was related to increased food price

inflation, but the overall trend of increasing prices has been flagged by the 1uarterly

inflation e%pectations inde% *see the chart below+2 and lines up with the thinking and

observations of most internal and e%ternal analysts which suggests the $hinese economy

is showing signs of overheating. 3he near term outlook for inflation will most certainly

be for continued rises in the near term, probably breaching the 4( target within a month

or two. Bai nay ng ta viet ve inflation cua $hina vao thang nen moi co du doan 4(
http://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Aggregate_supplyhttp://en.wikipedia.org/wiki/Aggregate_supplyhttp://en.wikipedia.org/wiki/Aggregate_demandhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_boomhttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Aggregate_supplyhttp://en.wikipedia.org/wiki/Aggregate_supplyhttp://en.wikipedia.org/wiki/Aggregate_demandhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_boom


2/13

trong vong 5 hoac & thang toi. 6hung ma thuc te gio la thang 57 roi, va inflation cua 38

dat muc 4.9( tu hoi thang '. 6en to nghi minh nen doi cau dau cua doan nay thanh

:$hina showed further signs of increasing prices as inflation rose to 4.9( )O) in

!ugust which was 7.9( higher than government target; va cau cuoi thanh :probably

reaching ( at the year of this year;.

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=C!

#$so lie% inflation c%a &'

http://www.bloomberg.com/apps/news?pid=newsarchi(e)sid=a*x+,,Iew

#$ d% doan inflation trong nam 00

ne% minh s%a nt thi nen thay bang ben d%oi thanh bang nay 1co so lie% den thang

23:

http://www.tradingeconomics.com/&emp/China-Inflation-4ate-Chart-00000.png?

db*d50b-*ca-*26-2c5-22*adf7852bc

hoac c%ng co the lay ca doan nay (ao (a them d% bao toc do tang lam phat o

c%oi.

China's consumer prices rose at the fastest pace in nearly two years in August, as severe floods and unusually

hot weather destroyed crops, driving up food prices. China's consumer price index rose 3.5% on year in August,

compared with 3.3% in uly, the statistics !ureau said. "he figure mar#ed the $th straight month the inflation has

risen. &ood prices, a maor component of the consumer price index, rose (.5% on the year. "he nation's worst

flooding in more than a decade has ravaged food crops and disrupted transport lin#s across the country, driving up

the price of fruit, vegeta!les and meat.)
http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=CNYhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4xBOOD1I2ewhttp://www.tradingeconomics.com/Temp/China-Inflation-Rate-Chart-000001.png?db4d30b1-4ca2-4286-8c13-884adf7938bchttp://www.tradingeconomics.com/Temp/China-Inflation-Rate-Chart-000001.png?db4d30b1-4ca2-4286-8c13-884adf7938bchttp://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=CNYhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4xBOOD1I2ewhttp://www.tradingeconomics.com/Temp/China-Inflation-Rate-Chart-000001.png?db4d30b1-4ca2-4286-8c13-884adf7938bchttp://www.tradingeconomics.com/Temp/China-Inflation-Rate-Chart-000001.png?db4d30b1-4ca2-4286-8c13-884adf7938bc


3/13

2. Retail sales


4/13

3. Loan growth

Incredibly topical, given concerns about $hinese overheating, and policy moves

already taken to crack down on e%cessive loan growth, the stats for !pril will give no

comfort for those with concerns of overheating. On a )O) basis this puts loan growth at

&( and lifts total loans above $6) = trillion. o this is a positive in terms of its

stimulatory effect on the economy, but a negative in terms of the inflation>overheating

conte%t
http://static.seekingalpha.com/uploads/2010/5/11/saupload_11maychin4.png


5/13

4. Money supply

On a similar track, money supply - a key monetary metric and important facet to

the inflation picture - saw continued growth in !pril. 3o some e%tent the pace of

growth in $hina can probably absorb some of the large e%pansion in the money

supply, but there will certainly come a point where its influence will become

increasingly inflationary. But as with loan growth - it lines up with comments byofficials along the lines of being concerned about inflation, but happy to keep

conditions relatively stimulatory to help the cement the recovery, and boost growth.

3he ?BO$ e%pects the broad measure of money supply which covers cash in

circulation and all deposits, to increase up to 5/( this year compared with &77@.
http://static.seekingalpha.com/uploads/2010/5/11/saupload_11maychin2.png


6/13

III. Causes and effects

1. Causes

i. Causes of an overheating economy in general

Overheating of an economyoccurs when itsproductive capacityis unable to keep

pace with growing aggregate demand. It is generally characterised by an above-trend rate

of economic growth,where growth is occurring at an unsustainable rate. Boomperiods

are often characterised by overheating in the economy.hi%, doan nay giong het denifition

. !h ma van con link o chu Boom cau cuoi day to ctrl A click vao la dc 2++, neu phai gui

ban mem cho thay thi doi 1ua file pdf truoc khi gui nhe ?

3hen, high levels of aggregate demand tend to be the cause of overheating. If

aggregate demand e%ceeds aggregate supply, then the e%cess demandfor goods must be

met via the over-employment of resources. 3his may be achieved by employing workers

for e%tra shifts or using machinery beyond their recommended working hours. 3his type
http://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Aggregate_supplyhttp://en.wikipedia.org/wiki/Aggregate_demandhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_boomhttp://en.wikipedia.org/wiki/Demandhttp://static.seekingalpha.com/uploads/2010/5/11/saupload_11maychin1.pnghttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Aggregate_supplyhttp://en.wikipedia.org/wiki/Aggregate_demandhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_boomhttp://en.wikipedia.org/wiki/Demand


7/13

of production is considered unsustainable because the over-employment cannot be

supported indefinitely.

ii. In the situation of China

tarting in 5@/', eng CiaopingDs reforms opened the $hinese economy and were

the maEor causes of $hinaDs economic growth. eng Ciaoping introduced began a series

of reforms known asgaige kaifang, or :reform and opening up.;


8/13

5 more reasons behind the rise of China

First, it is the pursuit of capitalism with a communist political system. $hinese

authorities have defended this combination as Jseeking truth from factsJ. !ccording to

the &77@ annual 0urun "eport, there were 547 known dollar-billionaires in $hinacompared to & in India.

Hay back in &777, according to the Kconomist, socialist $hina had the worldDs

brashest capitalist economy. tarting from 5@/', eng Ciaoping liberalised the economy

without changing the political system.

Second, $hina, like the Kast !sian 3igers, pursued a policy of state-sponsored

capitalism in the Lapanese style, albeit in a much more accentuated form. 3here was a

pronounced reliance on state-owned enterprises.

Third, $hina invested heavily in physical infrastructure. 3he pace of accelerated

investment in physical infrastructure is illustrated by how, relative to India, $hina ramped

up its rail network. Hith only 99,777 km of railways in 5@'9, $hina had a smaller rail

network than India *=&,777 km+. By &77=, with /9,777 km of railways, $hina had

overtaken India which had =,777 km. In &77=, as a proportion of G?, $hinese annual

investment of 5. per cent in infrastructure such as power, transport, drinking water,

irrigation and telecom was almost three times that of India.

Fourth, in sharp contrast to Lapan, $hina became the factory of the world, relying

mostly on MI. !fter the U, $hina is the second-largest MI recipient in the world.

Hhile MI inflows into $hina from 5@/@ to 5@@@ amounted to 47= billion, annual

average non-financial MI in $hina was about =7 billion during 5@@@-&77'.


9/13

It moved to a managed float in Luly &779, the renminbi gradually appreciated to

"


10/13

*roughly &7 percent faster than construction+ and now accounts for one-third of $hinaFs

workforce.

In general, the size of the service sector is directly correlated to the amount of

goods and services an economy consumes. 3his is why the government has spent such alarge amount of the stimulus on areas that benefit the domestic marketNthatFs where it

thinks the economy is headed.

Third! $hinaFs stimulus e%it strategy is simple--create a strong economic base

that the private sector can launch from. !fter private investment surpassed that of state-

owned enterprises in eptember, the two flip-flopped during October.

Given the environment, month-to-month fluctuations like this are to be e%pected

since private investment is dependent on how willing $hinese citizens are to put their

own money at risk. Kven though BeiEing is determined to wean $hinaFs economy off of

government stimulus, the government will not hesitate to ramp up activity should the

private investors become risk-averse.

Fourth! government controls on flow of money. !fter lending more money over

the first five months of &77@ than all of &77', weFve seen loan numbers come down.

3hereFs a longstanding pattern of new loans slowing down during the second part of the

year as banks have historically rushed to meet government-mandated loan 1uotas.

3he magnitude this yearFs slowdownNtrillions of yuanNis evident of BeiEingFs

dedication to prevent a bubble from forming. Once the figures grew too large, the

government moved 1uickly to hit the brakes.

Hhile U.. regulators have many holes to plug in order to keep the economy

afloat, the limited number of investment options available to $hinese citizensNbasically

stocks, bank savings and propertyNmakes it easier for the government to institute

controls.

Fifth! $hinaFs ong-3erm Goals "atch match u# $ith Short%Term &oals. 3he

problem in $hina is e%cess savings and not enough spending. 3he short-term and long-

term challenges are the sameNto get people to spend more.


11/13

"ecent signals that $hina will begin letting the yuan appreciate against the U..

dollar are not new. Mor several years, BeiEing has stated a gradual appreciation of the

yuan will benefit the economy, and $! e%pects BeiEing to resume a 9 to / percent

annualized appreciation process about midway through &757.

"apid economic growth may be common in emerging economies, but thereFs only

one $hina. !lready the worldFs third-largest economy on a nominal G? basis and

second-largest based on purchasing power parity, the $hinese arenFt making a break from

the back of the pack, theyFre leading it.

b) On the negative side


12/13

dien hat nhan co cong s%at lon> co the san x%at ra l%ong dien rat lon

http://trinm.wordpress.com/00/0/0/tr%ng-%@E@++@8c-tang-%y@E@++

@2n-l@E@++@+c-inh-t@E@+A@+B-b@E@+A@+ng-di@E@++@27n-nang/.

&at nhien (iec tang tr%ong %a nhanh se gay ra demand cho electric tang cao nh%ng

den noi shortage tram trong nh% (ay. io la 00> ma minh toan nhac den nam 00*

nghe (e hay cho lam> nhi? :

Third! property prices are rising. Investment in property development in &77

increased by &'.5( year-on-year and remained at a high level compared to overall fi%ed

asset investment for the same year *&9.'( year-on-year+. ?roperty prices are also rising

in light of this active investment in property development.

ay nua, minh sua so lieu cua nam &757

Third!property prices are climbing at markedly rate. $hinaDs property prices rose by a

record 5&.'( )O) in !pril, due to a comparatively low base in &77@ and a time lag for

tightening real estate policies to take effect. !ccording to the 6ational Bureau of

tatistics *6B+, the !pril increase topped an 55./ percent Eump in


13/13

.=( lower than at the end of the previous year. 6on-performing loans in $hina have

risen into the :trillions of renminbi; because of poor lending practices.

3he ?eopleFs Bank of $hina has underlined the concern that the risk involving

property developers will inevitably lead to a risk in banksF credit risk.

bai thuyet trinh ktvm phan 2

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