ZFC

Total Rating:
0 / 0

1 Comment

    • Sun Jul 13th 13:08 PM | Rating: 0 0
      Commented on:
      What is Considered Money Growth in China?
      "so it seems to me that there is no real distinction, as far as I can see, between a demand deposit and any other kind of longer-term deposit except that you get a higher interest rate for the latter."

      This is only true because your reference case is something like the US, where you need to pay a penalty for early redemption on a CD. Relative to that kind of disincentive, you think there is no disincentive for a Chinese to break a CD.

      A Chinese doesn't think that way, because his base case is not the US, with the penalty system. In fact, a Chinese laobaixing typically won't break a CD because he/she feels he/she has lost out on his/her interest payment.

      If you are a laobaixing on a monthly salary of 2000 RMB a month, you care very much about that extra "little" interest payment- paltry to you, but a reasonable percentage of income for them on say, a 10,000 RMB CD. And if you make 2000 RMB a month in China, you're doing better than roughly half the people in China. In other words, a lot of people still care about the opportunity cost blown.
      View article »
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»