As Hong Kong is a small economy that is highly open to trade, it is also highly susceptible to global economic shocks. This is most recently evidenced by the GDP slowdown to 1.7% driven by negative trade developments and the inevitable drop in exports due to the global economic crisis. However, despite the weak global economy, Hong Kong's growth has rebounded due to the resilience of domestic demand along with low unemployment, most notably in low-skilled sectors. Additionally, beneficial fiscal policies providing counter-cyclical support to the economy have bolstered Hong Kong's economic health. Through such actions as waiving rates for properties, reducing public housing rents, increasing capital spending, and tax relief, Hong Kong's government has proactively strengthened its economy. Through these and other beneficial factors, Hong Kong is thus predicted to rebound to 3% GDP growth by 2013. Despite this positive economic projection, Hong Kong is not without potential risks to its financial stability through a variety of underlying causes. The most prevalent of these risks is undoubtedly the collapse of the Hong Kong real estate market caused by a sharp and abrupt price correction. The underlying cause would be attributed to a run-up in housing prices that have doubled their trough of 2008 to a record in the past four years. According to Himaras, “Hong Kong’s apartment prices have surged to become the world’s most expensive after low interest rates and limited supply fueled demand, prompting the government to tighten mortgage lending and add taxes.” Furthermore, as the property sector represents half of the outstanding loans for use in Hong Kong, a sharp fall in price would bring about falling collateral values and negati... ... middle of paper ... ...han doubled since 2009 and represent the largest exposure. However, the U.S. and U.K. financial systems continue to generally be the more systemically-important for Hong Kong SAR, even though Hong Kong’s cross-border exposures to the Mainland are larger.” Despite these relationships, Hong Kong should continue to benefit from the series of beneficial factors that have proved essential to their growing success. In doing so, Hong Kong's economic future should prove stable despite the potential risks in the years to come. Works Cited Himaras, Eleni. "Hong Kong at Risk of Property Price Correction, IMF Says." Bloomberg. 12 Dec. 2012. Web. 07 May 2013. "People's Republic of China—Hong Kong Special Administration Region." 2012 Article IV Consultation Discussions (2012). International Monetary Fund. Web. .
Asia Policy 10, 144-151. Retrieved from NBR The National Bureau of Asian Research website: http://www.nbr.org/
Macroeconomic Forecasting Abstract Annual data was gathered on the United States' Gross Domestic Product and the economic indicators of unemployment, employment growth, inflation, and interest rates. Using 2004 as the base year, forecasts for the next two years were taken from three different forecasting organizations and compared to historical figures. Differences in projected data were addressed, as well as relationships between forecasts and among the targeted indicators. The results of the economic forecasts were applied to current Motorola operations and plans.
The 2008 financial crisis led to a sharp increase in mortgage foreclosures primarily subprime leading to a collapse in several mortgage lenders. Recurrent foreclosures and the harms of subprime mortgages were caused by loose lending practices, housing bubble, low interest rates and extreme risk taking (Zandi, 2008). Additionally, expert analysis on the 2008 financial crisis assert that the cause was also due to erroneous monetary policy moves and poor housing policies. The federal government encouraged the expansion of risky mortgages to under-qualified borrowers. Congress pushed for the support of affordable housing through extended procurement of non-prime loans for applicants with low income (Zandi, 2008). The cutting down of interest rates to low levels to supplement for technology bubble of early twentieth century and the effects of Sept 11, a housing bubble was created. This move facilitated individuals with poor credit to obtain mortgages in high percentage when lenders created non-conventional mortgages by offering mortgages with extensive amortization periods, loans with interest and payment alternatives such as ARMs (Angelides et al, 2011). Ultimately, interest rates rose again and many subprime borrowers stopped paying for their mortgages when their interest rate were reset to higher monthly payments. This paper will discuss the impact of the financial crisis as a result of subprime mortgages.
What would be the real impact of Chinese currency appreciation on the two economies (China and US) is the question that begs for answer. Already there a conflicting views of the real benefits of such a scenario. On the case of China, it has been argued that an appreciation would hurt the competitiveness of its exports. In the case of the US, the expected benefit as result of stronger currency are undermined by what opponents have describe as potential increase in the price of China’s exports that would consequently affect American consumers and firms that use parts and component made from China. A stronger currency similarly might limit the ability investor to purchase US assets (Morrison & Labonte, 2011). Considering the Mixed re...
In 2008, the Global Financial Crisis broke out; both the American economy and the economy in the West suffered a hard blow. However, a big economy system in the East emerged unexpectedly. China is now able to challenge the America’s decades-long dominant position in economic area. Started during the middle of 1990s, China’s manufacturing industry developed rapidly that billions of exports were floating out, and China was given the title of “the world’s factory”(BBC). By the end of 2010, China with a GDP of $5.8 trillion, surpassed Japan’s GDP of $5.48 trillion, became the world’s second largest economy system (BBC). China also exceeded Japan became America’s largest foreign securities holder. Since then, China has been seen as the US’s biggest opponent in economic field. Some economists even say that in 10 years, China will be the same size as the US economy. No matter whether China is going to reach the US’s economy size in 10 years or not, after forty years since the US first opened trade with China in 1972, America’s economy gradually relies on China’s economy and will collapse without the strength of China’s market.
Despite the fact that recent reports have shown that the Chinese currency is currently facing descending pressures, it is, however, likely to improve in the future because of the enhanced terms of trade, current account surplus that is growing, and high net saving. Another reason that will make the Chinese RMB to do well in the future it is because the currency has solid fundamentals and the economy of the country is significantly increasing at a higher rate than the GDP rates. Due to the growing Chinese economy to being the second largest economy, the Chinese currency yuan has been acknowledged by the International Monetary Fund (IMF) as a major global
...elopments concerning the mutual establishment of the permanent offices of ARATS and SEF are in the spotlight. Taiwanese President Ma Ying-jeou has repeatedly made positive remarks about this. As business and tourism ties between China and Taiwan get closer and more active, the need for the mutual establishment of the permanent offices of ARATS and SEF, which handles consulate-general-like operations, is rising. Details still remain unclear, including what operations and authority these office would have, what levels of officials would head them or what extent of diplomatic privileges would be accorded to the staff of the offices. Given that Taiwan already has the economic and cultural offices in China’s special administrative regions of Hong Kong and Macao, some researchers expect the permanent offices of ARATS and SEF to be established in the form similar to them.
Rotemberg, Julio, 2008, Subprime Meltdown: American Housing and Global Financial Turmoil, Harvard Business School Case Study 9-708-042.
Whereas China ushered in the 21st Century as member of the World Trade Organization (WTO) and as an economic power, Japan entered the Asian Century with a stagnant economy. And as China transforms its economy into a ‘socialist market economy’ it is held that the attendant social, economic, and political transformations necessitate that its state controlled IRs system is decentralized and more so, it should be converge with international best practice IR sta...
In order to understand the concept of financialization and the housing market on the global and local level, one must know that there is a global pool of money that is simply the worlds savings bank. In 2000 the pool had $36 trillion and has since doubled in size (Blumberg 2008). Its most recent profit increase was a result of developing countries and cities such as India, Abu Dhabi, and China making money. This doubled the cash pool available for investments, but left fewer solid investments for the taking. The solution was residential mortgages and the US housing market. The investment managers thought the low-risk high-return investment in the housing market was a good, stable idea. The glo...
http://www.uoc.edu/symposia/caixamanresa/jornadaeconomia/eng/vicky_hu.pdf> Naughton, B (2007) The Chinese Economy: Transitions and Growth, Cambridge, Massachusetts: MIT Press. Stoltenberg, Clyde D. "China's Special Economic Zones: Their Development and Prospects. " Asian Survey. 6th ed.
If the development of Financial Market in America is like a sturdy adult, I would say the development of Financial Market in China is just like a child. The history of the U.S. financial market was established and has been growing over two centuries. For China, only twenty year has now passed since the financial market was built and growth. The Chinese financial market seems to be immature compared to the U.S. For example, China’s financial market does not have a thorough monitored stock market. The child is just starting to imitate the behavior and follow the step of the adult. However, the child is too young that mistakes always being made. On the other hand, since the child is in his early growth stage, a high level of growth is undertaking and a large progress might be attained. In today's China’s financial market, it is necessary for China to gather finance professionals in development of financial market. As a recent graduate student, working in the finance field less than a year, it is extremely hard for me in making a tiny positive effect on the growth of Chinese financial. However, to be engaged myself to the development of Chinese financial market is my long-term career goal.
Debt crisis is becoming common and faced by most citizens in Malaysia. Between June 1997 and January 1998 a financial crisis swept like a brush fire through the "tiger economies" of SE Asian. Over the previous decade the SE Asian states of Thailand, Malaysia, Singapore, Indonesia, Hong Kong, and South Korea, had registered some of the most impressive economic growth rates in the world. Their economies had expanded by 6% to 9% per annum compounded, as measured by Gross Domestic Product. This Asian miracle, however, appeared to come to an sudden end in late 1997 when in one country after another, local stock markets and currency markets imploded. When the dust started to settle in January 1998 the stock markets in many of these states had lost over 70% of their value, their currencies had depreciated against the US dollar by a similar amount, and the once proud leaders of these nations had been forced to go cap in hand to the International Monetary Fund (IMF) to beg for a massive financial assistance. (W.L.Hill, n.d.)
In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the monetary and fiscal policy or giving bailout is needed in order to eliminate and control enormous effects of the financial crisis.
Many researchers have pointed out that the global imbalances are the root of the recent financial crisis. Portes claims that “the underlying problem in international finance over the past decade has been global imbalances, not greed, poor incentive structures, or weak financial regulation, however egregious and important these may be.” (2). According to him, the global imbalances lead to “the increasing in dispersion of current account”, which “puts a burden on financial systems to intermediate.”