Health check of the Dragon in my dream........

Last night, I had a dream. A doctor was doing a health check for the dragon. So I used this rare opportunity to ask the doctor a few questions. (In the dragon world, there is no such a thing called private issue and the big brother is always watching U!)

HAHAHA: Hi doctor, will the surging inflation affect the health of the dragon?

Doctor: No, not now. Do you remember in 1988 and 1994 the inflation rate soured above 25%. This time the symptom of overheating is not caused by excess demand, as it was in the past. Inflation is only 0.9% excluding food. The dragon also introduced price freeze on oil, electricity and water to curb inflation. Allowing the currency to appreciate can be an effective way to control the price index. This would reduce import prices of food and raw materials.

HAHAHA: How about if the stock market bubble burst?

Doctor: If the market tumbles this year, the effect to his health is only modest. The total value tradable shares is only 35% of GDP compared with 180% in Eagle at its peak in 2000. Less than 20% of total financial assets are in stocks and price fall will have less impact on spending. Growth remains strong even stock price dropped over 55% from 2001 to 2005. So, no problem to his health.

HAHAHA: What if the recession in Eagle place?

Doctor: During 2001 Eagle's recession, Dragon's export growth dropped 25%, but imports also slowed sharply, so the growth is remained strong. Domestic demand is more important. Even without the growth of export, the growth should still be over 9%.

HAHAHA: Is Dragon place running short of cheap labor?

Doctor: Yeah everyone was paid much higher than before but their productivity has risen much faster. Then the unit labor cost becomes much cheaper and this is very good too.

HAHAHA: Wow, it seems to me that the dragon is very healthy......

Doctor: Yeah, at least these two years should be alright. But, great care must be taken. Don't worry, dragon is a very very clever creature and he can make anything happen............

Source:"Economists" article "How fit is the panda?"