Himfr.com Reports The Real Challenge In China, Or Will Come From Within Asia

U.S. media said that Obama's visit to Singapore and China

, it will convey the following information: In order to promote the world economy, "restore the balance," Asia can no longer rely on U.S. consumption to maintain growth. In particular, he urged China to adjust economic policies to stimulate domestic demand; while advocating the United States to reduce consumption, increase savings and boost exports.

In theory, make Asian exports and U.S. consumption of decoupling, the task is not impossible. In fact, if you can do two things: First, the Chinese people as the representative of the Asian people to spend more, and second, the Americans learn to save money. In order to achieve the above-mentioned two points, a sufficiently large external shocks is a prerequisite. Sub-prime crisis and resulting global economic recession, precisely to provide such a possibility.

Time, a return to three months ago, people seem to have sufficient reason to believe: This World War II known as the most serious global economic downturn will eventually be a profound change everything; either Asia or the United States must be prepared to meet the transition pains.

During the first half of this year exports of Asian countries generally suffer a heavy blow to economic growth have to rely more on domestic consumer demand. In China's case, exports fell 21.8% in the first half, a rare decline for many years, of which exports to the U.S. declined by 14.1%; while total retail sales of social consumer goods increased by 15.0% year on year but the final contribution of consumption on economic growth rate is Up to 53.4%, significantly higher than last year's 45.7% level. The U.S. personal savings rate has a rare one to see strong growth. From August 2008 to 0.8% in May 2009 to 6.9%, the highest level over the past 15 years. Many people are convinced that the crisis has taught Americans to save the United States can rely on their own savings for domestic investment and financing, without having to rely on from Asia, especially China's capital. Has successfully predicted the sub-prime crisis, Roubini at New York University professor even said that the U.S. personal savings rate will eventually be 10% to 11%. According to the general principles of open macroeconomics, savings minus investment that is equal to net exports, the United States may even turn into a big country exports, at least sufficient to significantly reduce the country from China and other Asian imports.

However, to the third quarter, subtle changes have taken place in the situation enough to subvert the people had all kinds of illusion: As the global economy has gradually stabilized, China's exports fell significantly narrowed, and the U.S. personal savings rate slipped again after experiencing a brief rebound, 7, 8,9 months were reduced to 4.0%, 2.8% and 3.3%, it seems moving in pre-crisis level of convergence. Of course, some people can argue that the U.S. economy is only "jobless recovery" - the unemployment rate is still rising, this can not not residents of the United States has brought heavy pressure on Wujin pocket, increase savings, U.S. consumer confidence index in October down again are good. But the problem is that in the global economic recovery is expected to become increasingly dominated by a strong, consumer confidence, the future of U.S. residents will eventually be followed up firm. Generally been expected that the unemployment rate peaked in the first half of next year, when the U.S. personal savings rate will further decline. In addition, the global economic recovery phase, soaring crude oil prices will also be compressed in real disposable income U.S. residents and saving space. If the above trend established in the United States sooner or later will return to overdraft consumption age, while China and other developing countries in the future for a long period of time would still be able to restore and even expand its exports to the U.S..

Clearly, the cause of this dramatic change in the important reason is that the duration of the crisis and destructive have been greatly overestimated. I agree that, after 80 years of temper, the Great Depression left a number of painful lessons from their birth to the modern macroeconomics approach has long been deeply etched in the hearts of national economic policy makers, always warning them to avoid committing low-level errors. Of course, the more direct reason is that over the past year, both the growth of consumption in China, or the U.S. savings rate of recovery, the power behind the support is temporary, once the economic incentives has insufficient capacity, consumption and savings will be the surface of prosperity and rapid ebb.

From China's point of view, the short term to leave the United States, the most important consumer market is not realistic. On the one hand, China's huge production capacity, domestic demand is far from alone can not be absorbed; the other hand, although the export market can be diversified, but other emerging market countries and developing countries there is no ability to replace the United States. What's more, a considerable number of developing countries and China already exports there some sort of homogeneity and competitive relationship.

If we really want to change the spending habits of Americans, drastic approach is the United States through legislation to make certain restrictions on financial innovations, constraints, borrowing from consumer convenience. However, this anti-market initiatives in the United States could receive much support in doubt. Now that being the case, in order to reduce the trade deficit with China is the only place anti-dumping, countervailing and other non-tariff barriers, as well as through political pressure to force a yuan revaluation and other tricks. But past experience has shown that this does not allow China to make substantial concessions.

The author believes that the real challenge in China, or will come from within Asia. The before and after the APEC summit, the United States began in the exchange rate on the differentiation of Asian countries, and draw a number of countries proposed the establishment of "in line with economic fundamentals, the exchange rate market pricing mechanism" initiative, which aimed at China's intention is obvious. India, South Korea and some ASEAN countries, enterprises for the exchange rate peg to the dollar Chinese yuan reason why more and more discontent in the final analysis, or the recent of these countries currencies against the dollar in appreciation of the renminbi pegged to the dollar due to a firm in the exports to the U.S. has taken the some advantages.

Perhaps we do not have to care about the attitude of these countries, but one thing must be aware of: In India, the country's population gradually increased dividends, while China is faced with an aging population to accelerate and reduce the threat of the young, little by little lost in the labor-intensive manufacturing the area's traditional strengths. In addition to the exchange rate advantage, we still have what can be regarded as the core competitiveness? Between this increase and decrease, or endanger China as the "workshop of the world" status. In China's manufacturing industry has not yet occupy high-end market, you must have sense of crisis and structural adjustment strategies as soon as possible. This change should never be just the Government's wishful thinking, but must become an urgent health needs of the enterprise.

by: stefasuan

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