Sunday, March 1, 2015

China's Central Bank Cuts Rates Again to Boost Economy

 China's central bank cut interest rates for the second time in just three months. According to officials, it was triggered by rising deflationary pressure. Just last month, Beijing announced that China's gross domestic product rose an annual 7.4% in 2014, a 24 year low. China's economic growth is also expected to decline this year, possibly leading to the risk of dangerous job losses. The reason for this slowdown in economic growth is the result of government efforts to reduce trade and investment and rely more on domestic consumption.

 This slowdown could potentially have a ripple effect on other economies in different countries. According to Peng Junming, "The direct beneficiary of an interest-rate cut would be property developers and others with a heavy debt burden, such as local governments." In turn, this would have a negative effect on small businesses and fails to lift demand and consumption.

Questions: How could this economic slowdown affect the US or other countries for that matter?
Do you think it's worth it to reduce trade and investment to steer China's economy toward self-sustaining growth?
Do you think these reduced rates will help China's economy in the long term? Why or Why not?
What other actions could China take in order to stimulate its economic growth?
How can this action affect the other 4 broad goals of an economic system?

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