Rising China costs no shock for rest of world

• Source: Global Times
• [21:46 June 12 2010]
• Comments

In addition, in the short term Chinese-made goods will remain competitive due to the low cost and good quality, even if Western countries resume their own local manufacturing industries. Local governments and enterprises must have full confidence and global vision.

It will be a rough struggle, however. Chinese labor costs cannot go any lower and can only be raised, and China's export enterprises cannot penny-pinch any further. By contrast, the highly profitable Western companies have more room to retreat. On this occasion, confidence and courage are especially important for both sides and the side with less self-confidence will lose in the competition of interests.

This does not mean that China's export enterprises and local governments do not need self-improvement. The rising labor costs also require more compensation from China.

Studies show that the costs of the weak links in Chinese enterprise are more than twice that of their Japanese counterparts. If the costs of domestic industry chains can be lowered, the "China price" will certainly still be very persuasive.

In addition, we can also take this opportunity to upgrade our export products, improving the quality at the same time as we raise prices.

It will be normal to see the price hike of Chinese-made products due to rising Chinese labor costs, but it will be a lengthy adjustment process, and China and the world will need time to adapt.

The author is a researcher with the Beijing ANBOUND Consulting Group. forum@ globaltimes.com.cn