China as Saviors?

With Americans cutting back on spending, leaders in Asia are looking nervously at where they can sell their goods to. The Asian Tigers are all export-oriented economies and without the U.S buying their goods, it will take far longer for them to come out of the current economic crisis than the rest of the world. It tell you a lot when the best looking economy in South-East Asia right now is Indonesia, which does not have a export reliant economy.

So leaders in Asia are looking at China as the engine of growth for the world economy. The thinking is that with China’s population and growing affluent, the Chinese people will replace the Americans as the new buyers of their goods. Sorry, but I feel that is just pure fantasy.

There are several reasons for my thinking. First and foremost, the Chinese people are savers, not spenders. Although there are stories of young Chinese nationals who spend like crazy in the coastal cities, these young Chinese are vastly outnumbered by the poor people of China. Also there is no welfare system in China, so most Chinese people depend on their savings for their old age. Since Chinese leaders do not believe in the welfare system, much like Singapore, the Chinese people are not going to turn into big spenders anytime soon.

Another reason not to count on the Chinese people as the engine of growth is because their economy is also export-oriented! I’m willing to bet that the Chinese leaders, like the leaders of the Asian Tigers, are also on the lookout for a new export market. China is looking to export their way out of the crisis, not looking to import their way to help the global economy.

With most leaders in Asia unwilling to change the way their economy is being run, there is a desperate need for a new market to sell to. However counting on China as this new market is fantasy; like most Asian economy, they are too busy looking to export their way out of the crisis as well. They will not be the saviors of the global economy.