China Questions From Readers Answered
The US consumer is still king, but his kingdom is a lot smaller. With job losses mounting and consumers paying off debt, the propensity to spend is greatly reduced.
China’s economy has 40% of it dependent on exports. If the US consumer isn’t spending, this is a major problem for them. But the US isn’t their only choice and this is where things get interesting. The Chinese are stimulating domestic demand by the massive amounts of loans they are putting through the system. They also need to somehow get their own domestic consumers spending money.
In my upcoming article for Setpermber in SFO magazine, I wrtie about what they need to overcome. Here’s a sneak, condensed piece.
Essetially, the Chinese need to provide comfort to their people to alleviate their fears for having to save money. There is no public pension or Social Security in China. There is no government assistance for education nor health care. The government needs to begin to provide these so that people won’t feel to scratch and claw to save enough to cover these “major” expenses.
They are beginning to do this with a pension plan in the works, but are still a long ways away.
Until they can provide this comfort, we won’t see domestic demand in China rise up to the level needed to offset the drop from the United States.