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Iris Paper
the reasons of Excessive Liquidity? and suggetions? (China).How do you think about this phenomenon?
Mar 7, 2010 1:59 PM
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Answers · 1
I'm no financial expert, but I read "The Economist" which does a good job of explaining financial terms that the rest of us find impossible to understand otherwise. So, here it goes... China's has excess liquidity - that is, it has too much loanable and spendable cash reserves in its banks, coupled with too few assets to invest it in. This seems to be caused (some say) by China's high growth rate, its huge stockpile of foreign reserves and large numbers of small families who save a great deal (against future needs). The bad result is that those assets in which the money can be invested (real estate, for example) rise in value at too fast a rate, forming a bubble. Bubbles, as we Americans know only too well, tend to burst. The answer that I have read is for China to raise its interest rate. I don't know the theory behind it, but that's the solution that I hear most often. Please note that not everybody agrees with this solution, but most do. (Do economists every agree on anything?) Anybody may feel free to join the discussion, especially if they feel that I don't know what I'm talking about (I don't - I'm just quoting other sources)
March 7, 2010
Iris Paper
Language Skills
Chinese (Mandarin), English, French, German, Spanish
Learning Language
English, French, German, Spanish