Barrons: Why China Can't Save The World.

Why China Can't Save the World By KOPIN TAN {Excerpt-Link To Follow.}
Counting on China to jump-start the global economy is wishful thinking, unless its massive population magically morphs into a nation of spenders......

...Too Big to Ignore: China holds $1 trillion in U.S. debt. Premier Wen Jiabao has offered the U.S. advice on economic policy. Global investors see this as a good omen -- and hope the world's third-largest economy can rebound strongly enough to jump-start the global economy....With gobs of cash and relatively stable banks -- two things in scarce supply around the world right now -- China could emerge from this crisis as a stronger economic power. Warming up to that role, Premier Wen Jiabao has already taken to publicly admonishing the Obama administration to do more to safeguard China's $1 trillion investment in U.S. government debt. He is also encouraging expansion abroad, and relaxing rules to help Chinese companies make overseas acquisitions.
BUT FOR ALL THIS FLEXING, the Chinese economy isn't big enough to save the world, and counting on it to do so is simply wishful thinking. ....Despite its decades-long growth, it accounts for just over 6% of the global gross domestic product. "At best, China is an up-and-coming supereconomy in good fiscal shape that will suffer a period of slowed growth over the next few years, but will be fine," says Jeff Lick, who co-manages Boston-based Galt Investments. "At worst, it is an overbuilt and overinvested economy that relies too much on exports to the Western world."....

....Whether China can even save itself is uncertain. In February, exports plummeted 25.7% from the year-earlier level, and the tumble might have been worse if not for Chinese New Year.....The decline in exports already has shuttered factories, displaced more than 20 million increasingly restive migrant workers and offered worrisome signs of too much supply and potential deflation: Producer prices fell 4.5% last month, and real-estate prices are slipping. As exports fell, China's trade surplus shrank to a three-year low -- near $4.8 billion in February, from $39 billion in January -- a decline that, if continued, could temper its appetite for U.S. investments.
THE CHINESE PROPENSITY TO save also is a double-edged sword. Sure, China need not borrow or depend on the kindness of creditors to stimulate its economy, but goading domestic spending -- a key to future GDP growth -- could prove difficult. The absence of a safety net of pensions, public health care and social security drives the population of more than 1.3 billion to save more whenever times get tough, further crimping growth......

.....Can Chinese consumers now pick up the slack from the world's biggest spenders? Americans spent enough in 2007 to drive 18% of global GDP, a staggering number compared with the 2.1% accounted for by Chinese consumers. By Lick's calculation, if U.S. consumption were to shrink just 10%, the decline would already surpass what an entire nation of Chinese consumers currently spends. "And," he asks, "how many of you have cut back your spending 10% in the last three months?"
The Bottom Line: The Chinese economy isn't big enough and its people don't spend enough to offset the sudden thriftiness of U.S. consumers. It might not even be able to help itself....
That's why Stephen Roach, chairman of Morgan Stanley Asia, argues that China must steer its economy from capital spending toward private consumption, while the U.S. must save and invest in infrastructure, alternative-energy technology and human capital. "A post-crisis global economy is likely to struggle for years in the aftermath of America's consumption boom, and in the absence of any dynamism from private consumption elsewhere," he warns.

http://online.barrons.com/article/SB123759876416101475.html

My comment: Western investors simply do not understand China and her needs. In my opinion it is wishful thinking that the Chinese will sacrifice their own self-interest to accomdate us in the long run.