Chinese+Auto+Bubble+Risk+-+Vivien

January 12th, 2011
 * Article:** The Chinese Bubble Threat
 * CNN:**
 * Source:** http://money.cnn.com/2011/01/12/news/companies/china_auto_bubble_risk/index.htm?cnn=yes from cnn.com

This article is mainly outlining the problems of overly investing and predicting a continued exponential growth in the automobile market. The article warns the readers of the consequences of investing so many new markets into China as a bubble waiting to burst. Many automobile companies are stepping up on the the "battlefield" of competition over selling automobiles such as Ford which is expanding their market in China by fiftey percent. Slowing growth is already evident which shows that the automobile market's predictions are not following the basis of sustainable development and proves that the exponential growth China had experienced will not last forever. The author states that slowing growth and increased investment will result in overcapacity and surplus which will be costly for the automobile companies. Though it is smart for the companies to increase plantations to increase the supply of cars to match the demand of cars for equilibrium, automobile markets should not be overly confident of forever increasing growth.
 * Short Summary:**


 * Vocabulary:**

Overcapacity: The situation in which an industry or company cannot sell as much as it can produce. Surplus – An excess of production or supply over demand Supply: the desire of how much is supplied of a good or service and the price given to the product/good. Equilibrium: When quantity supplied matches quantity demanded at equilibrium. Shifts on Curve for Demand Curve: a shift to left or right is made to match the quantity supplied. Shifts on Curve for Supply Curve: a shift to left or right is made to match the quantity demanded. Competition [Between companies]: striving to gain or win something or establishing superiority over others who trying to do/sell/buy the same. Market: a gathering of people for the purchase and sale of provisions,goods. Sustainable Development: Seeks to produce sustainable economic growth without compromising the future generations' ability to do the same.


 * Diagram:**

I agree with this article that the huge growth in the automobile market cannot be taken too seriously for future investments because as described by the article, this exponential increase may just be a bubble, waiting to burst at any unexpected time in the future. The automobile market is not experiencing a sustainable development because the growth is not going to be able to be maintained for an extended period of time. At the rate at which automobile companies are investing in China, there are many hopeful predictions, possibly overly hopeful predictions, that may not come true due to overcapacity. China is currently at a very flourishing stage, growing its markets exponentially, but there will be one day when China's market will return back to a normal rate of growth. When China's market returns back to a normal rate of growth, it will not need the excessive amount of automobile plantations or markets companies are currently over investing in. The automobiles company may be hurt and as the article says that the automobiles investing in China "may turn the industry's biggest success story into its biggest headache before long." Over-      investing may result in surplus and overcapacity which will cause the automobile industries to lose profit.
 * Personal Opinion:**