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Orlik cites a 2011 survey from China's South Western University of Finance and Economics, which surveyed 8000 households and found that 55% of Chinese households had little or no savings for that year. 10% of households control 86% of wealth and 56% of household income. Surveys in 1995 and 2002 showed 10% of households controlled 31% and 41% of wealth. In the U.S. top 10% of households control 74% of the wealth, according to the Federal Reserve figures. What this means, says Orlik, is that before China can shift to consumption based growth the low incomes of the majority of households have to go up, requiring a major policy shift. Under current policies and even with movement in the direction of the DRC/World Bank policy report for China for a gradual shift away from state owned enterprises, there is little prospect for rebalancing the world economy.

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Sternberg points out that China's banking system lacks the experience in consumer credit and consumer finance products that would provide the impetus to a surge in consumer spending in China for imported products from the US or Europe. Outstanding consumer credit in China is only 13% of GDP, according to a 2009 study by McKinsey and Company, compared to 48% in Malaysia and 70% in S. Korea. China has lost a decade or more he says in allowing foreign banks to develop a consumer-finance market, and Chinese banks have little compettitive pressure to serve lower income consumer borowers. The Dutch PPF Group was allowed into this field for the first time in November 2010 to introduce in-store financing for durable goods purchases, something available to consumers in Brazil and other developing countries for many years. Large banks have an entrenched mindset to lend to businesses, and especially to state owned enterprises which have the collateral and government guarantees and support to obtain this lending. Risk averse banks in a financial system that lacks the kind of credit ratings system for consumers that the US and Europe have, prefer to lend to make loans to state owned enterprises where the government guarantees the loans. Interest rates on deposits are low and the government deliberately allows a wide spread for the banks so that they can ensure enough earnings to pay for non-performung bad loans, both from the last decade and from the binge in stimulus lending in 2009-2010. This reduces consumption by reducing the earnings on savings for consumers and households. These problems can only be solved gradually if the government and leadership want to change course, but this oddly enough is not happening. Other problems are that China's export factories are part of a global supply chain in which other countries do the product development, logistics, marketing, and retailing. Chinese firms lack the experience in these areas to shift to domestic consumers. As a result, says Sternberg, to lose a foreign customer can mean going out of business. Without government leadership and new direction through large scale re-allocation of capital and labor to the small scale businesses that serve consumers in the domestic market, all the talk of rebalancing will be just that, talk only and no real rebalancing....

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US Russia relations improve in 2025. The new national security document of US put out by the DJT Administration says that Russia is not a threat.  It sticks to migration and western identities when facing civilizational erasure over next two decades as key threats to the US. It poses questions for the European Union, Germany and France, yet also offers away out of the "mess" in Ukraine with the Russians saying NATO was too close to their borders as the real issue, and the US not aligning itself with NATO reducing big power tensions including nuclear arsenal expansion. Germany rebuilding the Bundeswehr and it's military offers a rebalancing of the military situation yet is not the long term solution to the Ukraine problem, NATO limiting it's role and the US limiting it's role in NATO offers a solution that preserves the long term interests of Western Europe(Germany, France, Italy, UK, Spain) and preserves world peace and dialogue. It also promotes integration of India and Russia into the world trade and world economy as it diversifies from the dominance of China in world trade and the world economy of the last 20 years of free trade that deindustrialized US and Europe. What this national security document does not say is that China's dominance in world trade and the errors of the US, Europe, Japan, Russia, India in world trading relationships and their economic approach that made this possible is the central issue and calls for diversification of supply channels in the world economy. This shifts the direction of the world in a peaceful direction where the US, Japan and Europe, India can compete in economic growth and trade with China on equal terms. ...

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The author Li Congjun, is head of the Xinhua News agency, official press agency of the People's Republic of China. He calls for rebalancing the global economy with China depending more on domestic consumption, efforts to restrain the excesses of property and asset price bubbles, and renewed focus on technology and investment.

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In an interview with the Wall Street Journal, Mark Carney, the head of Canada's central bank and the head of the Financial Stability Board, says China is falling behind in its earlier committments made at G-20 meetings to move towards rebalancing the world economy. He pointed to the fact that consumption in China has moved from about half of China's GDP to about a third, in the last ten years. China's investment has also declined from half of GDP to about one third. Carney also raised concerns about the strength of the Canadian dollar for Canada's competitiveness. The report "China: 2030" by the World Bank and China's Development Reform Commission also calls for changes in the way China's economy has increased its dependence on state run companies.

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Krugman points to some striking facts about China in 2011. Consumer spending in China is only 35% of GDP and has declined over the years. There are no signs of rebalancing the economy away from exports by increasing consumer spending. China's dependence on exports for trade surpluses is greater than ever. Beyond this there is another disturbing fact. With weak consumer spending and heavy investment spending at about half of GDP, Kugman raises the question where is all that increase in spending going? Real estate investment takes up about half of the increase in investment spending, as the share of GDP of real estate investment almost doubles compared to figures for 2000. Much of the rest of the increase Krugman attributes to firms selling to the construction industry. The speculative fever, the corruption at the local level, the shadow banking system which is not protected and unsupervised, the poor quality of statistics, suggest a bubble phenomena that may not be under control of policy makers, and risks damaging China economy and the world economy in 2012-2013. After all China's economic and financial planners and banks are no better than America's or Japan's, where asset bubbles burst causing serious damage....

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This New York Times editorial after the Senate passed a bill in October 2011 calling for action on the misaligned Chinese currency, points to ways a misaligned currrency is damaging for China. It cites the Peterson Institute for International Economics estimate that this is costing China $240 billion a year. This is a result of accumulating huge dollar reserves that have a declining value against the renminbi. Higher import prices lead to higher inflation. And low interest rates on savings, to the point that they are lower than the inflation rate, hurt the vast majority of Chinese and reduce domestic consumption. And perversely this leads to money pouring into speculative uses such as real estate, creating unsustainable bubbles in housing. The Times editorial says China is not generating jobs from this strategy, as the export strategy is relying on use of advanced technology in manufacturing and not creating many jobs. It cites a statistic showing employment has increased by only 1 percent a year from 2004 even with GDP growth above 10%. China is beginning to realize the cost of this strategy, and is planning a shift in its five year economic plan. But this rebalancing has many obstacles. The current system dominated by state run companies, banks, local and federal government, is biassed in favor of the old export led strategy, and experts are pessimistic about the possibilities for change. The Times suggests China may be falling back on the export led strategy as the global economy is slowing. The whole system would have to change after three decades of this kind of development, and would require new leadership and major changes....

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The U.S. trade deficit with China was declining till the coronavirus hit in February. Now it is back on the way up, a warning signal for the Trump administration as it seeks to stop sending American wealth out of the country in an utterly disproportionate way of $346 billion in just 2019 after taking action on tariffs and renegotiating trade agreements.  Imports grew 11% in July to $231 billion. While exports increased but not as much by 8.1% to $168 billion in July, still well below February/s $209 billion. That leaves a trade gap of $63 billion. This is the largest trade deficit since July 2008. The U.S. trade deficit is a major issue and is watched carefully as the Trump administration sets a goal of rebalancing world trade so that the U.S. no longer runs such large trade deficits with China, and Germany, and does not shift wealth overseas. The U.S. trade deficit with China in 2019 was $346 billion, with Japan and Germany it is much smaller close to $70 billion for each country. The Trump administration goal is to all out reduce this deficit through trade agreements and other actions that stop the current outflow of U.S. wealth overseas by $1 billion a day to just one country. For this it seek a level playing field which means other countries have to face tariffs if they unfairly subsidize their industries or violate labor rights for unfair competition, or in other ways seek to unfairly gain an advantage over the U.S. including through transfer of technologies from the U.S. ...

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"China's Superbank," by Henry Sanderson and Michael Forsythe looks at the rise of China Development Bank to provide insights into the two decade real estate boom in China, and the trillions of dollars in loans made by state owned banks to finance China's state owned industries and infrastructure development. The authors say these loans based on land owned by the state, improved with roads and other infrastructure and then sold to industry, have helped finance China's urbanization and industrial development. But it has also created problems including eviction of farmers from the land by local government authorites increasing inequality, led to misallocation of capital on bad projects, and an unsustainable model of development focussed on state owned companies. A major side effect of this is not covered in the book. This is the impact of crowding out of credit for private industry in China, with privately owned business having to pay higher rates in the underground loan market or lacking financing. A major focus of the report "China: 2030" by the World Bank and China's official think tank Development Research Center is on reversing this development to come up with a sustainable development model. The report was supported by World Bank chief Zoellick and China's new prime minister Li Keqiang. "The Great Rebalancing," by Pettis, a finance professor at Beijing University, looks at the other side of the financing of China's boom- the low interest rates on savings for China's consumer. This reduces household incomes and reduces purchasing power as the interest rates are lower than the rate of inflation. Lower value of China's currency also reduces the purchasing power for China's consumers. Estimates show the low interest rates cost China's workers and consumers somewhere in the range of 3 to 8% of GDP annually in bank deposit income. This money is funnelled through the banking system to make more loans for infrastructure and growth at the state owned companies, concentrating exraordinary level of financing in one direction. As a result the consumption share of GDP in China has actually fallen in the two decades of hyper development. This is about 34% compared to 50-55% for other Asian economies....

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The Editorial Board of the Washington Post draws attention to the speculative bubble in housing in China, the policies for sale of land by local governments that fuel the bubble, the corrupt local officials, and GDP growth that reflects overinvestment in housing creating serious imbalances in the economy. The structure of the economic and political system which promote this overinvestment in real estate has also reduced the role of the Chinese consumer in GDP growth, and is preventing a rebalancing of the world economy.

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China announced that it would make its exchange rate flexible, but also emphasized that it would do so gradually. What this means is that China will have a managed floating exchange rate. China followed a managed floating policy between mid 2005 and mid 2008, with a 21% upward valuation during that period for the yuan. During the 2008 crisis upto now the rate was pegged. The yuan was pegged at 6.83 yuan to the dollar. China is now rebalancing its economy so that it is not overly dependent on exports. The idea is to let domestic wages and domestic consumption pick up the slack in the markets of Europe and the USA. Europe is taking up austerity measures, and the mood in the US is shifting towards concern about growing budget and trade deficits. See the groups for "China wages" and "China workers."

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Pearlstein says the major news stories of today all are about the same theme- of how the US was encouraged to live beyond its means by trading partners who prospered as this went on, with the tacit agreement of financial and political leadership in the US who raised no alarm about this. These stories are: the G-20 meeting in South Korea with the goal of rebalancing the world economy, the President's Deficit Commission Report recommending bold steps in changing the tax and spending policies of the US, the criticism of the Fed's decision on $600 billion of quantitative easing, and the renewed concerns about Ireland where severe cuts in public spending have failed to reverse a downward slide.These trading partners prospered by lending Americans the money to consume more than they produce. It was he says a wonderful arrangement while it lasted, because it helped bring millions out of poverty in Asia, while letting Americans enjoy a transitory period of a higher standard of living. This unsustainable arrangement converted the US from world's biggest creditor nation after World War II to the world's bigggest debtor nation. He credits Geithner for coming up with a more convincing and less confrontational way to correct the imbalances by setting limits on the deficits and surpluses of trading nations. He points out that the Chinese have barely budged on the issue of an undervalued currency, the world be damned. And the German and Chinese criticism rings hollow he says, as both countries are the main beneficiaries of the current system. The normal mechanism of correcting imbalances with a floating rate exchange system is hardly relevant, as it is incompatible with state run economy and strategy of export growth of China. Erskine Bowles and Alan Simpson have presented he says a bold deficit reduction plan that is credible, fair, economically sound. Even though it was received with the usual complacency and lack of awareness both in the media and in Congress. The simple reality after all the awfully complicated details and the painful implications is this: Americans have to consume less and produce more, and trading partners have to consume more and produce less. And this shift cannot be pushed into the future as our trading partners would like....

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The constructive contribution made by the G-20 meetings of leaders towards building agreement on economic and other policies for peace and progress in the global economy. The meetings were especially useful for coordinating policy and addressing issues arising in the global economy after the 2008 financial crisis. Here Li Baodong, China's vice minister for international organizations and conferences, international economic affairs, describes the path ahead: IMF reforms implementation, better coordination of macroeconomic policies, pursuing the anti-protectionist and free trade policies with further support to the WTO and ministerial MC9 meeting in Bali in Dec. 2013, and infrastructure financing proposals for developing countries on the agenda at the St Petersburg, Russia, G-2- meeting in Sept. 2013. Baodong says the mechanism called the Framework for Strong, Sustainable and Balanced Growth as part of the G-20 meetings is a major achievement. Each G-20 economy submits it macroeconomic policy plan for a Mutual Assessment Process under this arrangement. The progress from the Bretton Woods financial architecture to the new arrangement- from the G-6 to the G-20 to include developing countries from India to Mexico and Brazil- is another major achievement, not fully recognized by the public, says Baodong. Interestingly Baodong makes particular mention to global rebalancing, rather than pushing what he calls the impossible task of increasing demand to get growth. This is a realization coming to China's economic policymakers under the new Jinping-Keqiang administration after the overly aggressive effort to stimulate demand in the 2009-2011 Stimulus, and the ensuing financial problems in the banking and credit system. It is indicative of the policy shift and its implementation underway in China in 2013-2015....

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Compromise reached at the October 2010 G-20 meeting in S. Korea to reduce trade imbalances, and for countries with current account surplus exceeding 4% of GDP (China 4.7% and Germany 6.1%) to bring these balances down by 2015. Countries with large current account deficits, Turkey 5.2% and South Africa 4.3%, were expected to bring their deficits down and increase national savings. The US is at 3.2%. The US proposal for a target was accepted by Japan as long as it was not a fixed target but a reference point. Germany was opposed, saying it was a return to planned economy thinking. China did not comment on the issue. Canada, Australia and the UK supported the US position. The compromise was an effort to continue pressure on China to redirect its policies away from exports to increasing domestic consumption, while still refraining from a fixed target. It also takes some of the pressure off a fast track currency rebalancing, with China expected to increase the value of the yuan, but given more flexibility than the rhetoric would suggest....

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S. Korea and the U.S. propose limiting trade imbalances to 4% of each country's GDP by 2015. S. Korea is the host of the current G-20 meeting. Germany and Japan oppose this move, arguing that their governments cannot engineer such outcomes, as it was determined by economic activity in the private sector. Japan's representative, Finance Minister Yoshihiko Noda, said that while he was dubious about the idea of setting strict numerical goals, it would be acceptable to use them as reference numbers. Germany has traditionally opposed the idea. Germany wants to be counted as part of the European Union, rather than as a single nation, in any such reference goal. China has not commented on the target. S. Korea has presented the idea as a way to use more than currency exchange rates to achieve a global rebalancing. And People's Bank of China Deputy Gov. Yi Gang said Oct 10, that China is planning policies that could result in its surplus falling below 4% of GDP in 3 to 5 years, from about 5.8% in 2009....

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Why rebalancing the world economy will not be easy. Rebalancing depends on the success of American companies selling goods in China and Germany. China and Germany report large gains in exports through August 2010. The US trade deficit in 2010 is up 40% from 2009. One reason is that it involves changing behaviour of consumers. Another reason is each percentage point reduction in the annual savings rate in Germany and China would increase consumer spending by $42 billion. By comparison each percentage point increase in the annual savings rate for the US reduces spending by $100 billion, according to estimates by McKinsey Global Institute.

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Robert Reich, a former Labor Secretary, says that instead of "rebalancing" with Chinese consumers buying more American goods and China exporting less to the USA, things are headed in the opposite direction. Why? Because at the macroeconomic level China is devoting more of its country's resources to production capacity. Chinese consumers are taking home a smaller proportion of the total economy. In 2008 personal consumption amounted to 35% of the total economy, whereas in 1998 it was 50%. Capital investment in the same 10 years went up 35% to 44%. Chinese continue to save and these savings are going into infrastructure and manufacturing capacity. There is even a social twist to the savings, with fewer young Chinese women than men parents with boys have to compete in the marraige market and save assets for this. Households are also saving to support more elderly people as population is aging quickly with population policies. All this means that with all the talk (see links to Niall Ferguson and Krugman), the situation will likely roll on in this manner till things reach an impasse, or there is a strong political backlash in the USA which leads to stronger trade actions by the government, or there is a crisis. Meanwhile the trade deficit is headed higher and Chinese foreign reserves will go far above the current $2.3 trillion. And the Europeans will also be getting restless with their trade imbalance, as the euro edges higher and the yuan remians pegged to the dollar, leading to trade distortions. ...

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Sharply lower consumer spending is hurting Apple sales in China. Apple cut sales and issued a sales warning in January 2019. This follows Apple's sharp slowdown in India with its uncompetitive pricing.

Retail sales growth in China- which bounced back in previous downturns- dropped to the lowest level in 15 years in November 2018. Auto sales are down with the sharpest drop in 7 years- the first annual drop in sales since 1990. Fears of a housing bubble have led to restrictions on home purchases for speculation which have not been lifted. Income tax reduction has not increased spending. GDP growth for the fourth quarter dropped to 6.4%.

Further signs of a sharp pullback are seen in the drop in consumption tax revenue falling by 61% in October and 71% in November 2018. The consumption tax is placed on cars, gasoline and luxury goods, and is paid by the companies making the products.

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China's agriculture based on small farms is undergoing a change as the government pushes automated farming and large farms in the face of limited imports from the U.S. China put tariffs on agricultural imports from the U.S. in retaliation for U.S. tariffs on Chinese imports. China's Agriculture Ministry says it will build 254 "strong agricultural industrial towns" as models for the country. President Xi stated on a visit to northeastern province Heilongjiang, that "unilateralism and trade protectionism are rising, forcing us to take the road of self reliance." The yield per hectare in the U.S. for soybeans is about twice that in China. Mechanized farming is limited in China because it would eliminate many jobs in rural areas. As the state has ownership of land and farmers merely use land, farmers are less likely to take risks with large long term investments. It can be risky for farmers to rent their land use rights to others, which would lead to consolidation.  Now a separate "Made in 2025" plan makes upgrading farm machinery and equipment one of the 10 goals. China may lift ban on genetically modified seeds now that ChemChina has acquired Swiss seed company Syngenta. China plans to partner with Asian Development Bank to provide $6 billion of loans, grants and investment to fund a list of development projects in rural areas, to modernize agriculture. WSJ cites a project of consolidation into an 8200 acre farm in Shandong province that  has increased yields 43% by investing in new farm equipment and planting machines, pesticide spraying drones. Scaling up has made this possible.    ...

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Retail sales in China dropped sharply. Retail sales dropped from double digit increases for most of 2014-2017 to single digits in 2018- sales dropping to 8.1%. Government restrictions to prevent a housing bubble restrained housing sales, and policies to control corporate debt limited growth. Higher inflation for food and housing, have led to asharp pullback in growth of consumer spending.  Trade tensions with the U.S. have hurt consumer sentiment. The feeling that China's growth would stabilize because of its connections to the world economy is fading as consumers see persistent trade tensions with the U.S. including tariffs of upto 60% in tit for tat actions as hurting China's prospects.  The GDP growth is expected to be about 6.5% for 2018 according to government estimates, which experts say is actually much less or even half that as exporters retrench in the face of slack demand in China and lower sales to the U.S.  Rail and other infrastructure projects that were considered unsuitable are now being given approval in efforts to boost the economy. More tax cuts and expanded deficit spending are policies likely to be followed.  At foreign companies no overtime, and job cuts are commonplace especially in the auto industry. ...

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China's trade surplus increased to $18.4 billion in April from $5.4 billion in March. Exports were up 4.9%, slower than expected and down from 8.9% in March. But imports went up by only 0.3%, much lower than March's 5.3% increase. The hopes for improving the trade balance in recent months may be dashed because of slowing imports for infrastructure development, as economic growth slows in China, even as export growth declines from its earlier high levels.

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This article in NYT by a China expert based in Hong Kong points out that a key driver in the current developmetns in Korea are not understood. With the growth of China's influence in East Asia and a decline in American influence many of the countries in the region are rebalancing. Vietnam and Singapore are pushing back. In the same way North Korea under Kim Jong Un is concerned about its dependence on China with 90% of its trade conducted with China. The Chinese participation in the strong sanctions introduced by president Trump has increased this awareness of its dependence on China. President Xi Jinping has also ignored North Korea as China focuses on larger issues in international relations, including its relationships with the U.S., EU and India. This strategic development is what drives the current meetings between president Moon of South Korea and president Kim of North Korea, and the planned meeting of Kim with president Trump.  This China expert says the shift in better relations could be part of North Korea's effort to open up to the U.S, South Korea and Japan, in an effort to diversify its relationships to reduce dependence on China. This does not mean the unification of North and South Korea, he says, because it would mean loss of power for the Kim regime and would be too costly for the South. The nuclear missile development was part of an effort to preserve the Kim regime. The Kim regime is also focusing efforts on economic development which would be better achieved by opening up to the U.S., South Korea and Japan. ...

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Manufacturing output showed brisk growth in the first quarter of 2011, growing at four times the estimated rate for the overall U.S. economy. The PNC Financial Group estimates growth for the first quarter for the overall economy at 2%. This growth is supported by exports to developing countries in Asia and Latin America with the help of a weaker dollar. American companies are also increasing investment in computers, machinery and other equipment. This has increased growth and profits for companies such as Intel, Caterpillar, Eaton, and United Technologies. Manufacturing in the U.S. is rebounding from the sharp drop in 2008-2009. During the first quarter it increased at an annual rate of 9.1% according to the Federal Reserve. In the second half of 2011 manufacturing is expected to slow to about 4%, according to Manufacturer's Alliance/MAPI. So far manufacturing has shrugged off concerns about oil prices approaching $110 a barrel and the earthquake in Japan. This growth has pushed the Dow Jones Industrial Averages to 12453, the highest close since June 2008....