Comments on: The Difficult Arithmetic of Chinese Consumption http://wallstreetpit.com/12688-the-difficult-arithmetic-of-chinese-consumption Wed, 08 Feb 2012 22:13:42 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Michael of Berkeley http://wallstreetpit.com/12688-the-difficult-arithmetic-of-chinese-consumption#comment-291813 Michael of Berkeley Mon, 20 Sep 2010 21:00:15 +0000 http://wallstreetpit.com/12688-the-difficult-arithmetic-of-chinese-consumption#comment-291813 Interesting article. There are a few possible explanation on this. Krugman (http://www.nytimes.com/2010/09/13/opinion/13krugman.html) argued that China's consumption is artificially kept low via its exchanged rate (lowered, pegged to the USD) while hold importing taxes to keep foreign products out. This results in goods being too costly within China, and so people consume less, and has a trade surplus resulting in a huge reserve of foreign capital. Another point of view was from a recent article on Money Economics (http://www.moneyeconomics.com/Commentaries/Why-is-China-Consuming-So-Little) that argued it's part of a growth process: you need to save capital and invest in order to grow further in the future, or playing catchup in the case of China. There's probably truth in both side of the arguments. Interesting article. There are a few possible explanation on this. Krugman (http://www.nytimes.com/2010/09/13/opinion/13krugman.html) argued that China’s consumption is artificially kept low via its exchanged rate (lowered, pegged to the USD) while hold importing taxes to keep foreign products out. This results in goods being too costly within China, and so people consume less, and has a trade surplus resulting in a huge reserve of foreign capital. Another point of view was from a recent article on Money Economics (http://www.moneyeconomics.com/Commentaries/Why-is-China-Consuming-So-Little) that argued it’s part of a growth process: you need to save capital and invest in order to grow further in the future, or playing catchup in the case of China.

There’s probably truth in both side of the arguments.

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