China saving too much money: Bush

AFP ^ | November 1 2006

[jmc1969]

US President George W. Bush said today that he hoped China would transform from a country where people "hoard the money they have" into one where people buy large amounts of US products.

In an interview with conservative radio talk show host Rush Limbaugh, Mr Bush said China should become "a society in which there's consumers. Because now they're a society of too many savers".

"If we can encourage China to become a country of consumers, you can imagine what it would mean for US producers and manufacturers to have access to that market," he said.

[Donna Lee Nardo]

"The chinese are smart, they need another 20 years of this to suck all new capital investment for tech and manufacturing into china, leaving the US with only services and government."

I agree with you and I say it may happen in 10 years. China demands that all manufacturers looking to locate within China train a Chinese workforce in all aspects of the manufacturing process, too.

BTW, I received an item from Israel recently and it had Made in China inscribed inside it. He he... I just shook my head when I saw it.

[You Dirty Rats]

Of course the President is correct. Too many here have bought into the "Bush is an idiot" mantra and failed to think first.

The President is not so clueless that he doesn't realize that the dollar glut in China is maintained centrally and that the workers and peasants are not sharing in that largesse.

Only a state-driven policy would keep accumulating foreign reserves when they already have plenty. Eventually they will need to do something with those dollars. At that point there will be an adjustment in trade.

[GOP_1900AD]

Good luck trying to influence a 4000 year old ingrained behavior.

[Mase]

there's no way any free trade agreement with China would even increase demand for American goods in China.

Our exports to China have tripled since 2000, and through the first half of 2006, U.S. goods shipped to China are up more than 40% over prior year and are on track to hit $60 billion.

The average Chinese person simply doesn't make enough money to buy anything made in the USA.

Looks like wages are increasing at a rapid pace. That has a lot to do with the dramatic increase of American made goods sold to China.

But four years after the Nebraska-based maker of structural steel products opened its Beijing factory, it's struggling with a labor shortage and soaring land prices amid China's economic boom.

Competition for managers, engineers and other highly skilled labor is especially intense and job-hopping for higher pay is rampant.

"Wages in China are definitely going up at a fast pace," said Behlen Chairman Tony Raimondo. "The movement of land value and wages has surprised many of us."

Chinese Wage Growth Surging, But Hasn't Fueled Higher Prices

[Sender]

What would occur is that an open Chinese market would be clamoring to buy US goods, all of which were made in China by themselves at ridiculously low wages. With so much disparity in pay, working conditions, laws, protectionism, copyright infringement and purchasing power, I'm not sure this equation will ever balance out. When someone in China wants a pair of Levi's or Timberlands, are they going to pay US prices and support US companies, or are they just going to make themselves a pair during their break? We still have abundant food and rock'n'roll though, so we have that going for us, and that's nice.

[Petey139]

That's absurd to just tell people to go spend, people save for a reason...so tomorrow will be brighter for them, in a country where alot of people earn $1 a day, saving is everything to them. Plus I also think money is more usuful than a PS2, it's worth something and doesn't lose value as quickly as materialistic stuff.

[Alia]

You explained this matter, clearly, and better than I have.

The DOW has and continues to hit record, historical highs. Unemployment is way down. All in America, and wrought by the Bush Admin. And some think he hasn't a clue about China's economy???

[Alia]

When someone in China wants a pair of Levi's or Timberlands, are they going to pay US prices and support US companies, or are they just going to make themselves a pair during their break?

Yes, they will. Although China continues to boost their own GDP, many of the "home-grown" products and resources are inferior to what the US exports.

Yes, the Chinese want something new too. Just like any consumer to be found anywhere in the world.

[RockinRight]

It's all relative. The Chinese make next to nothing, but also spend little to live. If they save $1000 they are in hog heaven by our standards.

[Nachoman]

I wonder if I can forward my credit card solicitations to China.

[You Dirty Rats]

The President is also receiving no credit for a major foreign policy success that will benefit our country for years to come: The development of much closer relations with India.

Like it or not, India and China have over one billion people EACH. We are third, with 300 million. To have friendly and productive relations with these two countries is sound policy.

Remember that Japan, Germany and South Korea at one point had VERY low wages and supplied us with cheap products. As those economies developed, their workers' wages rose -- in the case of South Korea, almost overnight as a result of political protests from workers who were not receiving their fair share.

Also remember that unions did NOT make the first steps to providing a great livelihood for workers here -- it was Henry Ford who paid workers well and created a prosperous working class.

China will eventually have to pay its workers better. Same with India.

[diesel00]

they like Buicks, for now. But once Chinese auto production ramps up, they won't anymore - until GM starts making Buicks in china.

Buicks sold in China ARE made in China. Buicks in China are made through a joint venture with the Chinese state-run Shanghai Automative Industry Co (SAIC).

[diesel00]

Shanghai Automative Industry Co (SAIC).

Make that Automotive, not Automative.

[montag813]

Oy, not happy to see the President decrying "too much" savings. I wish he and Bernake would counsel Americans to save more.

[diesel00]

Bush's advice to China is not economically sound. Poor countries become rich countries through a high savings rate, not a high consumption rate. Look at post-war Japan and South Korea (both East Asian nations, BTW). South Korea had one of the highest savings rates of developing countries back in the 1970s and 1980s, and today South Korea is one of the most dynamic economies in the world, while Mexico is still third world. Only after a country becomes rich and developed, does its consumption rate go up. Poor countries that start consuming very early on end up being like Mexico and the Philippines.

The reason high savings rate is necessary for poor countries is that poor countries lack basic infrastructure, and without a high savings rate, banks don't have the money to provide necessary loans. Sure, there is a lot of waste (in bad loans), but bad loans in infrastructure is still a lot better than bad loans in services, the former usually still provides some form of utility.

[andyahoo]

Bush should ask the Americans to save more, instead of the Chinese to spend more.

And what American products Bush are referring to anyways? Most American products are actually made overseas. So even if the Chinese spend more on American product, the American workers still won't benefit much.

[monkeywrench]

A couple of interesting articles on tough action being sought against china on a number of things. Being brought to WTO after report to congress. http://search.japantimes.co.jp/cgi-bin/nb20061029a1.html

[Mr J]

Nice post.

IIRC, China's households are saving over $10 billion each month -- truly a tremendous opportunity for US exporters, IMO.

[oceanview]

well, there goes that.

[Alia]

Also remember that unions did NOT make the first steps to providing a great livelihood for workers here -- it was Henry Ford who paid workers well and created a prosperous working class.

Henry successfully introduced the production line. He went a step further, which blew out the brains of most economic theories of the time - his is the model for the efficiency-wage theory. In 1914, the $5 workday, a huge SUM for those times. Turnover fell, absenteeism fell, and the productivity rose, thereby lowering production costs.

I like talking about him. :)

You are so right in re India and China -- I think it will come. Perhaps not as quickly as some would like, but when I review the timeline between former President Nixon opening the pathway to China, and now -- For a country that HUGE, I think they are making progress rather, relatively, quickly. India is going to boom in a huge way and all indicators show they are hungry for the boom, and understand how the free market works, and have come to trust them.

I think President Bush's suggestion/proposal to China for them to allow Chinese citizens to direct their savings to their own choices is a good one. And, I think China is ready for it.

Culturally they battle internally, methinks, between the old way (under the table) and the newer way, upfront and on the table.