Any sub topic of Microeconomics - Term Paper Example

Economic Theories: The Chinese government involved itself in following the policy of debt and deficits and so the fiscal policies went unrecognized. Limited foreign and domestic borrowing took place during the period of 1979 to 1993. The year 2007 witnessed a rise in government debt. The financial crisis around the globe prompted China to take expansionary fiscal policies which resulted in fiscal deficits. In the seven year period during 2001 to 2007, the Chinese economy witnessed a rising growth curve, while the fiscal policies withdrew stimulus at the same time.

It witnessed closing of the output gap. The way for the prudent fiscal policy was laid by the shift in fiscal policy. The significance of the fiscal policy lies in rebalancing the growth tendency towards domestic demand and service production. The growth possibilities in the short run can get stimulated by the direct spending of the government. Monetary Policy Fixed interest rate regimes act to be the constraints in operation of the monetary policies. China initially suffered from poor financial system and weak institutions catering the economy.

The inefficient functioning of the system led the authorities to revalue the currency compared to the dollar, in 2005. The currency maintained the stability level, and the value was set by the functioning of the market. The economy can find itself prone from macroeconomic shocks if it maintains a low level of inflation. The concerned authorities depended upon the monetary policies to control food prices. The strengthening of the effective exchange rate was witnessed by the appreciation of the currency of the country.

Policies on Trade Concerned authorities were created within the country, which took care of the policies on trade and other policies related to anti-dumping and other issues. The restructuring process paved the way for creation of new trade policies under the state agencies. The policies of trade and foreign direct investment coupled to penetrate into the global platform for China. The transparency in the policies was improved by taking appropriate steps. The policies were drawn to be in line with the rules of the World Trade Organization (WTO).

The barriers to trade were withdrawn and regulations were reduced so as to enable free flow of goods. The steps laid the foundation stone for China, to set benchmarks on the global arena in terms of contribution to the world’s imports and exports. Chinese economy tried to follow the characteristics of an open economy and so took steps to smoothen the way for trade policies. The constraints on foreign investments were withdrawn and offered fast liberalization to suppliers from foreign countries.

The forecasts made by some leading authorities across the world estimates the economy to grow at over 10%, under the anticipation that turbulence in the European region will lack the capability to shed the effects on China. The potential of China as forecasted by reliable agencies takes into account both the ups and downs of the country. According to the forecasts the country is expected to meet the targeted growth rate. The rise in consumer prices and that of inflation will not be a sustaining situation.

The market may weaken, but will definitely not collapse. Relation with the book The article shows the pillars of emergence for an economy