Deficit in America, Surplus in China

Quotes from the WSJ: 23-15 Jan, 2009.

- China needs its consumers to sepnd. Actually getting that to happen is another story.
- China's boom has stalled; 4th quarter's growth slid to 6.8% well below the double digit level.
- Yet Beijing response so far has been to beef up the government's role as a consumer, notably through a nearly $600 billion fiscal stimulus plan. But that wont incentivize Chinese consumers to spend more nor offset a decline in spending on china export destination struck but the recession such as America and the Europe.
- With Chinese households holding a collective $3.3 trillion in savings but debt of only $835 billion, China has the opposite problem to the U.S.-and excess of savings instead of too much debt.
- Andrew Peaple

So, Beijing will have to do more and response promptly to the situation. Andrew suggests China follow other Asian nations in offering shopping vouchers, particularly to urban residents. Lower income taxes may not help that much effect since many Chinese are exempt already while others find ways to dodge payments.
Lower interest rate also doesnt help, with evidence in the past, Chinese residents save diligently in 2007 despite the low interest rate.

The more Chinese save, the worse the recession will be.