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Part - III
Any discussion is incomplete without talking about China. The Chinese economy is overheating and may not be able to hold its currency stable against the dollar much longer. If China can slow its economic growth gradually from 11% to 7%, it would be a minor miracle. An abrupt slowdown would shock global financial markets. You cannot control exchange rates and inflation indefinitely. The Chinese are having problems with consumer price inflation and asset price inflation. All the liquidity is an enormous policy problem. Sometime in the next 12 to 18 months, there will be an adjustment in their currency peg.
Finally, there is, as always, the prospect for unanticipated events to upset all the experts' forecasts - natural disasters, political crisis and war.
Concluded.
* Contributed by -
Ravi Birhman, B.E. (Computer Science), BITS, Pilani,
Kshitij Goel, B.Tech. (Mechanical), IIT Guwahati,
Post Graduate Diploma in Management (First Year),
Indian Institute of Management, Calcutta.
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