Read the following passage carefully and answer the questions given below it. Certain words/ phrases are printed in bold to help you to locate them while answering some of the questions.
The news from China in recent weeks has been dire. Violent strikes and protests are reported almost daily. Millions of workers are out of jobs. Economic indicators presage more gloom, with electricity production for industry falling 4% in October, the first time it has declined in a decade. So is China – the “fragile superpower,” as historian Susan Shirk memorably termed it- about to experience the one thing its leaders have feared for years : a so-called hard landing of its economy that could spark widespread social unrest ?
How will China Weather the Financial Storm ? China’s View of the Financial Meltdown : Alarmed But Confident. Behind the Global Markets’ Meltdown. The gloom-and-doom camp makes a persuasive case. Nouriel Roubini, a professor at New York University, had been warning for years of the dangers of an international financial implosion – and the current economic crisis proved him depressingly right. In a recent article Roubini has laid out a bleak scenario for China. “The risk of a hard landing in China is sharply rising,” he writes. “A deceleration in the Chinese growth rate … is highly likely, and an even worse outcome cannot be ruled out.” But a clique of China specialists inside the country predicts a different outcome. They believe that a range of factors unique to China will not only preserve it from the worst of the global meltdown but also keep its economy chugging along at about 8% GDP growth in 2009. So who’s right ? I’d go with the locally based economists. While the U.S. fiscal package is unlikely to add even 1 percentage point to American growth, a recent report by Merrill Lynch estimates that the $600 billion stimulus Beijing unveiled in mid-November will likely add 3 percentage points. (And that was before China’s provinces unveiled their own $1.4 trillion bailout plan, which depends on a massive infrastructure-building spree to boost the economy.) Such growth would be unachievable in other economies. But China remains a special mixture of raging capitalism resting on a foundation of state domination. “People who don’t follow China on a regular basis can miss some of the underlying drivers of growth,” says Arthur Kroeber, a Beijing-based economist, who cites factors such as changing demographics, the adoption of new technology from developed countries and rapid urbanization. Yes, there will be plenty of pain. Kroeber and others predict a rough next few months. They also concede that a sharp decline in exports will hit China hard, possibly cutting 2.5 percentage points off growth in 2009. There’s also the strong likelihood that tens of millions of dollars will disappear into China’s bridges to nowhere – or into the pockets of corrupt local officials. Still, if any government can drive change by diktat, it’s the Chinese Communist Party. Doomsayer Roubini writes: The government cannot force corporations to spend or banks to lend.” In fact, Beijing can do exactly that – and is doing so now. “On the outside, China’s banks do look a lot more like normal Western commercial banks,” says an investment-bank analyst with a decade of experience in China. “But every single senior officer right down to the manager of the smallest branch in Inner Mongolia is a Party member. And when the Party says, ‘Jump or we’re all in trouble,’ they say, ‘How high ?” The same principle applies to state owned enterprises, which account for about a third of the nation’s GDP. Some of the problems China now faces are a result of economic policies that are finally kicking in at an inopportune time. Concerned earlier this year about spiking inflation and a blistering yearly growth rate of 11% or more, China’s economic czars set out to cool things down. They introduced tough labor laws designed to decelerate production of lower-value-added goods. It’s in that sector that hundreds of thousands of workers are now losing jobs. The same holds true for the bubbling property market, where Chinese authorities conveyed to potential home buyers that they would be wise to hold off. “The government basically said, ‘You’d be an idiot to buy an apartment right now because we’re going to make sure that prices drop like a stone’,” says the investment-bank analyst. “Chinese people stopped buying. Now the government is telling them, ‘It would be a great time to buy, and the banks will be happy to lend to you.’ Of course people will start buying again.” China’s current economic woes come at a momentous point in history. Dec. 18 marks the 30th anniversary of when Deng Xiaoping launched the nation into the most extraordinary burst of economic development the world has ever seen. For almost this entire period, outsiders have been predicting that it wouldn’t last. And each time, China has forged ahead. The financial crisis has led the whole world into uncharted territory. But the one constant in this changing world may be China’s ability to surprise once more.
QUESTION:
1. Which of the following was the prediction of Roubini regarding China ?
(A) Retardation in rate of growth and financial crisis.
(B) Preservation of China’s financial well-being in spite of global meltdown.
(C) Increasing risk of a hard landing.
(A) Only(A) & (B)
(B) Only (B) & (C)
(C) Only (A) & (C)
(D) All the three
(E) None of these
2. Which of the following statements is definitely TRUE in the context of the passage ?
(A) The Chinese economists introduced tough labour laws to counter decline in production of lower value added goods.
(B) It is felt that Chinese economy will stand upright despite the global meltdown.
(C) Chinese economy is a blend of capitalism and state domination.
(A) (A) & (B) only
(B) (B) & (C) only
(C) (A) & (C) only
(D) All the three
(E) None of these
3. In the context of the passage, what is the belief nurtured by China specialist in the period of global meltdown ?
(A) China has certain unique factors that would effectively counter the global meltdown.
(B) China will be able to maintain 8% GDP growth in the coming year.
(C) China’s superpower has now become vulnerable in the light of global meltdown.
(A) (A) only
(B) (B) & (C) only
(C) (A) & (C) only
(D) (A) & (B) only
(E) None of these
4. Which of the following are the factors that are in favour of China during the crisis period ?
(A) Changing demographics.
(B) Import and adoption of modern technology from developed countries.
(C) Slow but steady organization.
(A) (A) & (B) only
(B) (B) & (C) only
(C) (A) & (C) only
(D) All the three
(E) None of these
5. ‘Jump or we’re all in trouble,’ they say, ‘How high ?’ What does this sentence signify ?
(A) All the decision makers in banks in China fall in line with the political parties’ diktat.
(B) The decision making bankers always question the party leaders ‘decisions.
(C) The bank officials are not bound and willing to work under domination of political party.
(A) (A) only
(B) (B) only
(C) (C) only
(D) (B) & (C) only
(E) All the three
6. What is the impact of America’s fiscal package on its growth ?
(A) It is likely to boost economy
(B) It will reduce the financial crisis substantially
(C) The US$ 600 bn. will definitely boost economy
(D) There will be only negligible addition to the growth rate
(E) None of these
7. What seems to be the root cause for the disturbances in China in the recent times ?
(A) Violent strikes and protests by workers.
(B) Retrenchment of large number of employees.
(C) Threat to Chinese superpower from other countries.
(A) Only (A)
(B) Only (B)
(C) Only (C)
(D) All the three
(E) None of these
8. Which of the following can be the most correct prediction about China’s facing economic crisis ?
(A) The burst of economic development of China is not going to last any longer.
(B) China, like most of the countries in the world, will land into uncharted territory in the face of financial crisis.
(C) Though China has forged ahead in the past, this time it will not succeed in countering the global melt down effectively.
(A) (A) & (B) only
(B) (B) & (C) only
(C) (A) & (C) only
(D) All the three
(E) None of these
9. Most of the Chinese workers are losing job in ________
(A) Investment Banks.
(B) Property Market.
(C) Lower Value Added Goods.
(A) All the three
(B) (A) & (B) only
(C) (B) & (C) only
(D) (A) & (C) only
(E) None of these
(Source: UCO Bank PO Exam Paper -2009)
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