Offer a U.S. Treasury secretary visiting Beijing one wish, and he will certainly opt for a revalued Chinese currency. Offer a second, and the probable choice would be a strengthened social safety net.
Timothy Geithner followed bipartisan tradition when he recently called on the Chinese to strengthen their social benefits. Indeed, it has become an article of faith that a solid welfare state will allow the Chinese to curb their abnormally high savings rate — which is at the heart of the global economic imbalance.
Luckily for Geithner, this consolation prize appears within reach. China’s spending on welfare rose 27 percent last year.
Particular excitement has surrounded China’s plan to provide near-universal healthcare by 2011. Free from the need to stockpile for a medical emergency, the Chinese people will be more able to splurge on consumer goods, it is thought.