CJC_H1_ECON_P1

© Catholic Junior College 8819/01/Prelim/11 CATHOLIC JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATIONS In preparation for General Certificate of Education Advanced Level Higher 1 ECONOMICS 8819/01 Paper 1 13 September 2011 1300-1600 Additional Materials : Answer Paper 3 hrs READ THESE INSTRUCTIONS FIRST Write your name, class and question number on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use paper clip, highlighters, glue or correction fluid. Begin each question on a new sheet of paper. Section A Answer all questions. Section B Answer one question. At the end of the examination, fasten your work securely together. Submit each question separately. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 8 printed pages.

© Catholic Junior College 8819/01/Prelim/11 [Turn over] Answer all questions. Question 1 Property Markets Extract 1: Deconstructing China’s Property Market: What’s Behind the Bubbles? A year ago, as the global economic slowdown began to drag down China’s growth, the government rolled out measures to stimulate the domestic property market, which accounts for around one-third of fixed-asset spending in the country. Interest rate cuts and lower deposit requirements were among the measures introduced. In response, those Chinese who could afford it have gone on a house-buying spree. What is behind the staggering growth? Experts concur that the main short-term reason for the feverish growth in Chinese property markets is the excessive easing of credit. As China turned to its banks to fund much of its stimulus programme, nearly RMB 10 trillion of loans were extended in the year to October, representing 150% more than the previous year Yet China’s property market raises other, more fundamental concerns. One of them has to do with the land on which the property is being built. Economist Zhou Tianyong, deputy director of research at the Central Communist Party School, said in an interview published on December 3 in Economic Observer, a weekly Beijing newspaper, that soaring property prices are the result of the monopolistic way public land is auctioned. Ye Hang, an economics professor at Zhejiang Univ ersity in Hangzhou, is among the experts who concurs that rapid growth in China’s property sector could bring inflationary challenges, but not in the short term. That said, government policy decisions made in the near term could determine whether the challenges will crop up in three to five years, he argues. What's more, the boom could result in greater income disparities and weakening consumer power for many, according to blogger and economics columnist Ye Tan. “If people lose the ma jority of their consumer power after buying an apartment, what wi