- In a table, provide basic up-to-date economic and demographic data of your country. Choose which data you find most important to your nation (China)
|Year||GDP||GDP per Capita||Population Growth|
Source: World Bank, 2016 GDP is the most important data in my nation
- Find out what major financial disaster(s) your country has incurred in the last 50 years
The January 2016 stock market crash in China.
The stock market crash in China affected most of the industries that have stocks traded in the Chinese stock market. The Chinese Yuan also decreased in value by 6.5%. The industries that were most affected were those in the manufacturing sector. Nonetheless, the stock market has since stabilized (The Economist, 2016).
The 2008 global financial crisis.
The 2008 global financial crisis hit the Chinese economy hard. Since the countries highly relied on an export driven economy, negative impacts on other world economies resulted in a decline in the manufacturing and associated industries in China. In particular, the recession resulted in trade contraction and a slowdown in the country’s GDP (Bulman, 2010).
- Does your country have a stock exchange? Yes
Shanghai Stock Exchange. Market capitalization $3,986 billion
Shenzen Stock Exchange. Market capitalization $2,285 billion
Hong Kong Stock Exchange. Market capitalization $3, 325 billion
- What are the different regulatory entities? What are the roles of those entities?
China Securities Regulatory Commission
This regulatory commission has a duty of supervising securities exchange markets as well as instilling penalties to individuals who violate the market’s guidelines.
China Banking Regulatory Commission
It has the duty of regulating the banking sector except for the regions of Hong Kong and Macau
China Insurance Regulatory Commission
It has a duty of ensuring that the Chinese insurance industry is stable by regulating the insurance market and products offered.
- What are the important non-regulatory entities?
Auditing, tax, legal, accounting, and consulting businesses.
Holding and trust companies
Businesses that provide finance classification
- How is the government involved in regulation and how is it NOT involved?
The government is involved in setting policies and regulations on how business and the stock markets should operate. In addition, it also controls the lending and access to credit by regulating the banking sector through the China Banking Regulatory Commission. However, the government on itself does not directly trade in the securities market as a means of regulating and influencing its behavior.
- Compare China and US system
- The Chinese financial system uses a fixed exchange rate regime. However, it has started to adopt measures of deregulating the foreign exchange policy in the country. In its efforts towards a market-oriented regime, the country through the People’s Bank of China (PBC) changed its reference pricing method. In this new tactic, the PBS sets the opening trading price in the Shanghai China Foreign Exchange Trading System (CFETS) every morning and lets it sway either up or down depending on the market changes (Prasda, 2016). On the contrary, the USA government uses a flexible and full marked determined financial exchange system. Basically, the prices of the dollar relative to prices of other currencies in the country’s foreign exchange markets are determined by the changes in its demand (Council on Foreign Relations, 2016).
- Are there any aspects of your country’s financial governance that you believe is better than the US system? What aspects do you think are worse?
The regulation of capital is an important aspect of the Chinese financial sector which is not found in the US. Precisely, this system prevents capital flight and ensures the stability of the country’s economy. On the contrary, fixed economic regime leads to an unfair balance of trade. Essentially, the devaluation of the Renminbi relative to international currencies makes Chinese exports be cheap in international markets. As a result, this measure has resulted in the implementation of heavy taxes and trade embargos on Chinese products by various countries to protect their local industries.
- Overall what is your evaluation of your country’s system?
The country’s financial sector is starting to modernize and open up to the world. In particular, the easing of policies on the exchange rate regime is a right step in ensuring that the Renminbi is influenced by market forces and a result, it represent its market value in the foreign exchange market.
- Why are economists annoyed by the ad? What is the backdrop of mortgage-backed securities as it relates to the crisis of 2008?
This ad encourages consumers to acquire mortgage-backed securities as a means of improving their quality of life. While a mortgage by itself is not bad, the manner that this advert was developed illustrates that once a person acquires a mortgage, he/she is able to acquire other assets without a reasonable means of repaying for these commodities. As a result, most people acquired various mortgages, which enabled them to acquire assets through mortgage-backed securities. Notably, these acquisitions were not accompanied by an increase in individuals’ sources of income. Later on, there were huge defaults and subsequent losses by banks and other credit companies. In turn, this led to the financial crisis of 2008.
- How was this phenomenon dealt with – or not dealt with — after the 2008 crisis? Be specific on any regulatory responses.
- The US government acquired a government insurance of $300 billion in new mortgages. This finance was used to refinance loans of about 500,000 individuals.
- The government sent 15 billion to states to buy and fix foreclosure homes (Viega, 2008).
- The government established and adopted the Basel iii financial reforms. These financial reforms aimed at increasing the resilience of banks and financial institutions ability to cope with stress by increasing their capital ratio (Bank for International Settlements).
- The government established the Federal Housing Finance Agency. This is an institution that has the mandate of regulating the housing finance sector as well as the duty and ability to place government-sponsored enterprises (GSEs) into conservatorship or receivership.
- Consider the current state of the US economy. Could we repeat history? Why/why not?
History cannot repeat itself. The policies that the government established in the financial market were effective in taming reckless borrowing, as well as financing of projects without a thorough analysis of the borrower and the investment.
- Consider the upcoming US presidential election as it relates to your answers above. Applying currents events and your own personal opinions, briefly evaluate Clinton and Trump from the perspective of expansionary or contractionary policy. If candidate X is elected, what do you think will happen to the US investing environment and why? Be sure to support your belief with references.
Both Clinton and Trump would adopt expansionary monetary policies. In order to spur economic growth of the country, these individuals would adopt policies aimed at minimizing the cost of accessing credit. In turn, most individuals would be able to access loans for their business, which would result in high economic growth (BBC, 2016).
Question: Multiple Choices
- Cause of a steady rise in AAPL stocks.
Choice A. Announcement of annual report
- Which of these would signal a direct move by the Fed to tighten the economy?
Choice D. Raising the rate of currency drain.
- Many analysts blame regulators themselves for causing, enabling, and ignoring High-Frequency Which of these might analysts point to as evidence of this?
Choice E. Poor computer technology at stock exchanges
- The following are true regarding hedge funds
Choice E. Defined contribution plans are a major investor in hedge funds
- Which of the following indicate scenarios of good corporate governance?
Choice B. Most Board members also share management duties
- According to lecture, which of the following are true regarding FINRA?
Choice E. FINRA is responsible for providing real-time price data on US bond trades
- Survey Questions:
- What do you want to do as a career after UNH?
I want to become a financial analyst and work in the Federal Reserve.
- What % of the material that we’ve studied so far did you already know? 80%
- What do you want to learn about finance that you have not yet been exposed to?
- What do you think of this class so far?
The class has been good. The uses of real-life scenarios, such as the financial crisis in 2008, have made the class to have a feel of the real world financial sector.
- Describe the best teacher you’ve ever had at the high school or college level. What made this teacher resonate with you?
My best teacher in high school was Madam Rose. She was empathetic and could understand when I had a problem in grasping new topics. In addition, she used to encourage me to work hard.
Bank for International Settlements (2016). Basel III: International regulatory framework for banks. Retrieved from http://www.bis.org/bcbs/basel3.html
BBC. (2016). What is quantitative Easing? Retrieved from http://www.bbc.com/news/business-15198789
Prasda E. (2016). China economy and financial markets: Reforms and risks. Retrieved from https://www.brookings.edu/testimonies/chinas-economy-and-financial-markets-reforms-and-risks/
Council on Foreign Relations. (2016). The global finance regime. Retrieved from http://www.cfr.org/financial-regulation/global-finance-regime/p20177
The Economist. (2016). China stock market crashes again. Retrieved from http://www.economist.com/news/business-and-finance/21685146-chinas-stocks-and-currency-start-2016-big-tumbles-chinas-stockmarket
Viega, A. US foreclosure filings surge 65% in April. Retrieved from http://web.archive.org/web/20080526140850/http://news.yahoo.com/s/ap/20080514/ap_on_bi_ge/foreclosure_rates
World Bank. (2016). GDP per capita. Retrieved from http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=CN