China Being Cautious

Even in a time when China's economy is booming, they are still skeptical and safe with their economic decisions. On Febuary 12, 2010 China said that they need to increase their reserve requirement for their banks. This is not because China wants the US and other economies to decline, they are doing because they want to contain their economic growth. Too much economic growth can cause a speculative investment bubble which they don't want. A speculative bubble is caused by making exaggerated expectations of future growth of the economy, causing bad investments and lowering securities.

As a result of China's actions, the Dow Jones fell greatly the day China announced their increase in reserves. This is because the US greatly relies on China for their investments and if it looks like China is going to pull back, that greatly hurts us. Also with Greece's growing dept that they can't seem to pay off and other European nations following, investments in other countries seems a little reliable at the moment.

Learn more about this at: http://www.cnbc.com/id/35372634/site/14081545/for/cnbc/