U.S. Financial Turmoil Makes Its Accusation Against China a Joke
The Wall Street financial storm caused by the sub-prime crisis is sweeping the globe. Many countries hope China will become a life-saving straw to help save the market. Reports from the Canadian media said that this crisis makes U.S. officials previous accusations against the Chinese economy a laughing stock.
According to a report of Canadian "The Globe and Mail" on the 10th, October, U.S. Treasury Secretary Paulson once criticized the Chinese people for saving too much, spending too little. He said that if China wishes to develop a modern economy, the Chinese government should encourage the Chinese people to open their pockets and spend money, as Americans do.
But now Paulsons words have become a joke. Todays global financial crisis, largely speaking, should be attributed to the Americans pre-consumption and low savings. However, Paulson was indeed telling the truth in saying that the Chinese people save too much and spend too little. And their excessive saving behavior partially leads to the Americans excessive consumption.
Chinese people are the most economical in the world. They have saved 25% of their disposable income, with an increase of 7% between the years 1995 and 2005. The Chinese government is also saving. Years of huge trade surplus and rising foreign investment has led to huge foreign exchange reserves in Beijing, reaching an incredible 1,800,000,000,000 U.S. dollars. This figure is rising rapidly.
Over the years, China has been a big buyer of U.S. Treasury bills, bonds and blue chips, and this helps the United States with its debt and budget deficit. For a long time, such an arrangement looked very good for both sides. For its remaining funds, China finds a safe place to invest; while people in the United States are enjoying the low interest rates brought about by Chinas purchase of American government bonds. However, the Chinese are saving for tomorrow, while Americans are spending money as if tomorrow does not exist.