8 Ways China is Exporting Inflation
China is experiencing inflation.
Seeings as China is the world's factory, why shouldn't the middle kingdom export this impact on other country economies as well?
Last year China's consumer price index (CPI) was over 6%. The CPI was in the 4% range in 2006. America's CPI was 4.1% last year compared to 2.5% in 2006.
China is exporting inflation.
I America can expect price increases of as much as 10% on some goods:
1. toys, if they can get them to pass the safety standards. 80% of toys bought in the U.S. are made in China.
2. clothing – 40% from China
3. footwear – 85% from China.
These price increases in the U.S., are just in time for a possible recession, too. Thanks China! Or is the recession causing China to need to raise prices?
II When China's prices are low, other markets are forced to keep their prices low as well – think Viet Nam, Malaysia and so on. When China's prices are up, those factories can raise their prices as well.
III Factory wages have risen 80% in many coastal areas in China. Most of China's factories are on the coast. Higher labor costs, labor shortages = higher prices.
IV Beijing wants to move China up the global manufacturing chain. Forget the least-finished products, toys and think advanced exports like electronics and autos.
V Plastic prices are up 30% because of higher oil and petro costs.
VI Tough new labor laws makes hiring and firing more difficult. Think labor unions.
VII The dollar is down about 7.6%. The weaker the dollar the more expensive Chinese goods become.
VIII Factories are asking for 20-50% price increases on 2009 orders.
The solutions?
China can move its factories inland.
China can outsource to even cheaper countries.
In the meantime, we can expect things 'Made in China' to cost more.
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