[Texas_Jarhead]

Lotta "ifs" in that scenario...

[Shermy]

"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,"

OMFG. He said that?

[pnh102]

Have to respectfully disagree with the CiC here... there's no way any free trade agreement with China would even increase demand for American goods in China. The average Chinese person simply doesn't make enough money to buy anything made in the USA. This is further exacerbated by the fact that the Chinese can make any consumer good that might be produced in the USA for far cheaper in China.

[monkeywrench]

"And the reason why they're saving so much money is because there's not a pension plan or a legitimate health care system. And so, therefore, people hoard the money they have in anticipating a bad day," said the president.

"If we can encourage China to become a country of consumers..."

[Moonman62]

They are consumers of our debt. I'd leave it alone.

[Alia]

President Bush is correct. From my old archives. Craig S. Smith, March 30, 1998, The Wall Street Journal:

China squirrels more than half of that [1997 Capital Surplus of $67 billion] away into foreign reserves which are invested abroad. Chinese companies funnel much of the rest directly overseas through bank transfers - sometimes skirting Chinese capital restrictions.
...
Usually, however, developing countries invest their capital in their own growing economies. And some Chinese officials believe that's what China should be doing, too. One former Chinese central bank official calls it "scandalous" that a country of poor peasants is financing investments of an industrialized power such as the United States."

[Brilliant]

Don't agree with him. They are saving a lot because they started with such a small capital base.

[RightWhale]

Pres speaks truth, but he is about a light year ahead of current common understanding of economics. It will be hard to get the Chinese to go on a spending spree since so many have fairly distinct memories of their parents telling them how rough it can get at any moment.

[GOP_1900AD]

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

[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.

[Nachoman]

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

[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.