China and U.S. Attempt to Reverse the Trade Deficit. Resolution for Recovery?

China and the U.S. met in Washington this week, to resolve trade deficit and finally speak about real issues that face both countries. Besides clean energy and security the real matter on China’s mind is what the U.S. is doing with their economy. Because China holds nearly 8 Billion in U.S. treasuries, the Chinese are just as concerned about the U.S. economy as Americans.

The trade deficit is a serious existing problem, but in actuality, it is nothing new. For thousands of years China has been a self sustainable country, never relying on trade with anyone in particular. Historically and presently, China hasn’t “needed” foreign goods (aside from Opium, but that’s a whole different story). In such a diverse yet unified country, they have virtually every resource available locally besides oil. Conversely, China is an exporting machine and the U.S. is there prime buyer – hence the deficit.

Besides butchering a few Chinese words, President Obama made several important points on how their relationship will form the next century. Like I and many others have stated, at its current rate of growth, China will surpass the U.S. within about 20 years in terms of economic and military power. Although the odds are against the U.S., if the meeting finds mutual benefits and cooperation, can the U.S. expect to be pulled out of the recession? Riding on the coat tails of China, manufactures revenues will swell from U.S. buying locally, and increased demand for products in China.

A second question that comes to mind is if the Chinese can truthfully begin to start spending more. The Chinese are known to save more than the other countries due to an unstable market. Can the government provide sufficient safety and reduce enough risk to get the population on a spending track?
-John Cutrone III