China Becomes The High-Cost Provider Of Goods(burst of wage hikes begins)

24/7 Wall St. ^ | 06/07

[TigerLikesRooster]

China Becomes The High-Cost Provider Of Goods

Posted: June 7, 2010 at 5:45 am

China has a problem. Before the recession it was clearly the low-cost provider of goods among the largest nations of the world. Its inexhaustible workforce were another advantage. Its manufacturing facilities are massive.

It has only been in the last year or so that China’s cost of labor has spiked up. Like Japan, the country is the victim of its own success. China has created a huge middle class, and that middle class expects a standard of living that relies on healthy wages, and in a nation prone to inflation, raises.China has also let US and other foreign manufacturers have some measure of control and inspection of the facilities that they have on the mainland. Apple Inc (NASDAQ: AAPL) can pressure Foxconn to treat workers better and raise their wages after a series of suicides. Foxconn cannot do without Apple’s business. Walmart (NYSE: WMT) suppliers cannot do without orders from the world’s largest retailer. The list of China exporters whose fortunes are tied to a small number of US companies has grown The workers at the Chinese companies have leverage. Honda of Japan learned that the hard way. Workers simply shut down an auto plant because they wanted higher wages. Honda gave in.

[TigerLikesRooster]

Reportedly, wages are set to rise pretty much across the board. They can no longer hold off worker's pent-up frustration with persistent low wages. In just 9 days, Foxconn's monthly wage skyrocketed from 900 Yuan to 200 Yuan. Other companies is said to be facing the similar pressure and widespread wage hikes, though probably not as dramatic as Foxconn's, are pretty much a done deal, according to reports from China by S. Korean media.

[TigerLikesRooster]

P!

[UCFRoadWarrior]

Looks like those Liberal Globalists who push Free Trade with Communist China....are about to get their butts handed out on a plate. The Anti-American “cheap labor” days are gone.

Maybe the Liberal Globalists can go off and have a good cry with George Soros somewhere....

[THX 1138]

If they would simply allow their currency to be fairly valued, there wouldn't be a problem.

The ChiComs are robbing their own people through devalued currency, IOW, inflation...

[Frantzie]

LOL! China went from 3 cents an hour to 9 cents. I guess Nike can work em harder for their hero TIger and the other liberals at Nike.

[UCFRoadWarrior]

Reportedly, wages are set to rise pretty much across the board. They can no longer hold off worker’s pent-up frustration with persistent low wages. In just 9 days, Foxconn’s monthly wage skyrocketed from 900 Yuan to 200 Yuan. Other companies is said to be facing the similar pressure and widespread wage hikes, though probably not as dramatic as Foxconn’s, are pretty much a done deal, according to reports from China by S. Korean media.

---

It was bound to happen. Communist China could only keep wages so low for so long. They are in the midst of having a severe labor shortage, and, Communist China could only keep the prices of their goods low for so long.

In the short run....prices of goods will rise, worldwise. In the long run...jobs return to the USA....unless the Anti-American Liberal Free Trade Globalists concoct some other bad trade idea....probably assist Communist China in scavenging Africa....

[Clintonfatigued]

Some Americans, including many who are otherwise well-informed, thought that a nation could prosper without a manufacturing base. I think they’re being proved wrong, with tragic results.

[UnbelievingScumOnTheOtherSide]

Times change.

Today when the slaves get uppity, we just find new slaves.

[UnbelievingScumOnTheOtherSide]

see post 8

[SunkenCiv]

Inflation, all I ever wanted, inflation, had to get away...

[Last Dakotan]

In just 9 days, Foxconn's monthly wage skyrocketed from 900 Yuan to 200 Yuan.

Wow, that negative 78% is a big increase.

[TheThirdRuffian]

Sounds like markets coming into balance.

Shockingly predictable.

[TigerLikesRooster]

Correction200 Yuan -->2,000 Yuan

Sorry for really embarrassing typo.:-)

[TigerLikesRooster]

Sorry, obviously it should have been 2000 Yuan.

[PGR88]

China stopped being the low-end price setter around 2005.

This article focuses on pressure from the likes of Apple or Wal-mart for wage inflation, which is ridiculous.

China’s wages are rising because, simply, growth of their economy, local inflation, and demographics. There is less extra labor around. Also, even though these 1-child family princes may not be rich, many are still spoiled!

[rmlew]

1 Yuan is worth $0.15. So 2000 Yuan a month is $300. That’s $3600 per year instead of $18,000 per year in the US, assuming minimum wage.

[TigerLikesRooster]

Right. This Foxconn incident has become a symbolic trigger. Apple and Wal-mart no doubt exploit the issue to their favor. It is no surprise that corporate PR department always coopt trendy social issues to boost their image. Their rather ostentatious display of their concern with environment is a typical example.

[listenhillary]

“skyrocketed from 900 Yuan to 200 Yuan.”

Need a new rocket surgeon.

[listenhillary]

We all do it. Some are better typos than others. ;)

[TigerLikesRooster]

Then you have to factor in cost of long transportation, and other issues with maintaining long-distance supply chain. Factor in the looming political instability, and things get costlier. It should be also noted that factories in China can be relocated to other less well-developed countries. It may not lead to visible economic boost. However, it erodes China's economic power, which in turn undermines its ability to dictate the world economy and their long-term threat to the security of the West and other industrialized countries of Asia.