Daily Lessons from Life 09 May 2011 - Geithner asks China to reform growth model

"Geithner asks China to reform growth model - AFP Mon, May 09, 2011

WASHINGTON - US Treasury Secretary Timothy Geithner said Monday that China was making progress but needed to change its economic growth model as he opened two days of talks between the world's two biggest economies.

Striking a largely positive tone at the start of the US-China Strategic and Economic Dialogue, Geithner said that reforms needed by each country "are not in conflict, and the strengths of our economies are still largely complementary."

"Our challenge is to strengthen the foundations for future economic growth," he said.

"In China, building on the remarkable reforms of the last 30 years, the challenge is to lay the foundation for a new growth model, driven by more domestic demand, with a more market-based economy and a more sophisticated financial system," he said."

I am not sure what the world's biggest debtor nation has to advise the world's biggest creditor nation on growth model. If Mr Geithner is sincere, the one that he MUST mention is: living within your income and forget about credit!!

Alas, this will, unfortunately, not be the advice from him. Instead, he is asking the Chinese to SPEND domestically!! That the financial system can be MORE SOPHISTICATED like in the USA with derivatives this and derivatives that that allowed the Chinese to 'play the risk and reward game' (i.e. gambling!) and best be advised by some top USA banks like Goldman Sach, JP Morgan, etc. LOL!!

Lessons for me are:

1. the Chinese should find its own model and forget about the USA model as it has shown itself to be bankrupt of ideas and morality!;

2. the Chinese should NOT bank on using property as the engine of growth even though it is an industry that will move a lot of resources like: monetised lands that belong to the people of the country, use a lot of cements/steel/machines/labours/ etc, then the accompanying roads/rails/shopping malls/energy/etc... STOP thinking that you can borrow based on the 'values of your assets'!;

3. the Chinese should THINK HARD about how to help the 700-900m people who DO NOT live in urban cities live a good life where they are NOW. Trying to make all these people city dwellers without knowing if it is an improvement in their quality of live or not will be irresponsible and dangerous. Many of these people need to know that they can have some of the modern amenity's even as they till the land and grow foods for the rest of the population of this vast country!

Whatever China do, just stay away from the USA brand of capitalism and growth model. It is bankrupt! It is poisonous!