China '09'

If you have China anything on your investment wish list you may want to wait a bit. So far the Asian giant's stock market has soared some 80% because the Chinese government has thrown everything including the kitchen sink, at stimulating an already hot economy. Beijing has shoveled so much money into businesses that it has artificially propped up employment and manufacturing. According to Time Magazine so much money has been poured into Chinese companies that they have invested some of those proceeds into the equity market for lack of better alternatives causing the markets to skyrocket.

Americans, on the other hand, have closed their wallets to spending and instead have increased their savings from virtually zero to 7% of gross income. The Chinese consumer is on a spending spree. But, and there is always a but, the Chinese remain a relatively poor people with an average per capita income of $6,000 compared with $39,000 in the U.S. Even middle managers in downtown Beijing average at best $12,000 a year. So the Chinese are unable, as yet, to pull the world economies out of the current economic recession by the sheer force of their consumer spending; something the United States consumer can and used to do without half trying.

So while China is building and experiencing its own bubble, of a sort, it has not become a dominating world player that can uplift the world's economies like the United States once did and still can. The Chinese are more like the French, and no one looks to the French to do much economically.

The Chinese were caught in the middle of a massive infrastructure buildup when the 2008 depression hit. Those projects could have been shut down or continued, which is what Beijing did to stimulate the economy and keep it growing.

Spending continues to grow even as corporate profits are shrinking, which leads some economists to think that the Chinese may be seeing the beginning of the end once the stimulus of their spending wears thin.

The question I have is what happens when the economy really sours in China? Will the Chinese government continue to buy our debt or will they sell what they already own and to whom?

Or, am I needlessly worrying and by the time the Chinese economy sours the United States consumer will ride to the rescue and spend again like nobodies business?