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Labor cost rise in China will ignite a worldwide inflation
www.chinanews.cn 2006-06-20 10:58:34
Chinanews, Beijing, Jun. 20 �CMorgan Stanley chief economist Xie Guozhong
recently predicted that China would become a source country to start the
next round of global inflation, which would be signified by a major
commodity price hike resulting from rising labor cost in China and higher
production cost pushed up by China��s implementation of a stricter
environmental protection standard.
The rising production cost will soon make Walmart, the world��s largest
retailer, frown. As China is now implementing stricter environmental
protection standards and the country is brewing a salary raise for
workers, production cost will soon rise and the 7-dollar woolen sweater
will become a thing of the past.
Expensive labor cost, stricter environmental protection standards and the
rise of raw materials prices will make the inflation bubble become bigger
and bigger in China. As the production cost rises in China, commodity
price for products such as toys, clothes, electronics and other exported
products will soon rise inevitably.
As Chinese government tries to boost domestic consumption by raising
workers�� salaries, the production cost of export goods in
labor-intensive industries, such as textiles, will soon go up. Export
goods in labor-intensive industries account for 30% of China��s total
export. The price of export goods will also be raised as China implements
a stricter environmental protection standard, which in turn will push up
the price of some chemical goods.
It is expected that China��s production cost rise will push up the U.S.
inflation rate by 0.5 percentage point, and the global inflation rate by
0.7 percentage point every year.
In fact, price hike has already taken place in many Asian countries now.
The latest statistics released by the U.S. Department of Labor shows that
last May, the average imported commodity price from Asia and the Pacific
region (including China) already rose by 0.2 percentage point.
Statistics from the Economic Intelligence Unit (EIU), with its
headquarters based in London, shows that in 2005, the average labor cost
in China already climbed to 1.36 US dollars per hour, up 72% from 2001.
EIU predicts that such labor cost will keep rising in the future, and by
2010, it will be twice the present figure, although by then, the minimum
labor cost in China will still be 4 percentage points lower than that in
the United States.
At present, local governments in at least five provinces in China say
that they plan to raise the minimum salary for workers. Large cities like
Shanghai and Guangzhou also plan to increase the minimum salary. This
shows that pay raise has already started in China.
��China will not see inflation this year
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Disclaimer: viewpoints in the website do not represent China News Service
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