1. China Overheating
Economic
Ilhamsyah Ramadhan
University of Brawijaya

2. Overheating Economics
The economy that run in bad condition is
called economic overheating.
Where high rates of inflation. That where
financial authority duty to start little brakes
at a time when there are sign of economics
overheating so that economic grow still
healthy.
Monetary and fiscal brakes must begin when
the real sector is being soaring. Here the
authority of the financial sector will be
tested.

3. Criteria of Overheating economic
1) whether the real economic growth rate
has surpassed the potentialgrowth rate.
2) whether the economic growth is bounded
by the bottlenecks of resources and
technology.
3) whether the economy is facing the
pressure of inflation and risking the
accumulation of nonperforming loans
(NPLs).

4. China Overheating
China is facing destabilizing inflation; capital
has flowed into China must faster than it has
flowed out, in part because Chinese
residents are prohibited from investing
abroad.
China's reported inflation rate on consumer
goods rose to 5.4 percent in March, but its
implied inflation rate is 8.4 percent--a large
discrepancy suggesting that China is
underreporting its inflation rate.

5. Why China is Overheating
China's economy is overheating because for years
capital has been flowing into the People's Republic
much faster than it has flowed out.
Recently, capital inflows to China have accelerated so
rapidly that even the usual measures to absorb the
impact on growth of the money supply and spending
have failed.
Given the legal restrictions on nongovernment capital
outflow, the only way China can slow the growth of
excess liquidity and the upward pressure on inflation
that has been building since last year is either to let
the currency appreciate faster, raise interest rates
more, or raise reserve requirements more.

6. Positive Impact
The positive of the economic growth in
China is mainly reflected in the
improvement of the level of life of the
community in that country.
In the last 10 years, the level of per capita
income doubled, which obviously has
implications for aggregate demand for
goods and services in both countries. New
cities with skyscrapers springing up as a
phenomenon that has never been equalled
by any other civilization.

7. Negative Impact
One of the victims was a U.S. flooded cheap
products from China.
Combined with extra expansionary fiscal
policy during the Bush administration
junior, Uncle Sam's trade deficit is getting
unbearable. To fund the deficit should be
no inflows. Therefore, in raising interest
rates begin to up since 2002.