Saturday, February 27, 2010

Rising Wages in China = Re-Valuing China's Currency

NEW YORK TIMES -- "Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage. As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses. Factory wages have risen as much as 20 percent in recent months (see chart).

Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods. Rising wages could also lead to greater inflation in China.

Reasons for the labor shortage?

For one, the Chinese government has rapidly expanded postsecondary education. Universities and other institutions of higher learning enrolled 6.4 million new students last year, compared to 5.7 million in 2007 and just 2.2 million in 2000. At the same time, China’s birth rate has been sliding steadily ever since the introduction of the “one child” policy in 1977. Labor shortages have returned quickly in recent weeks as these long-term trends have collided with a recovery in overseas demand for Chinese goods.
 
Consumer spending is also rising briskly; auto sales more than doubled last month from a year before, and this has created many jobs in retailing, restaurants, hotels and other inland businesses.

Though the wage boost increases the prospect of inflation, it may have another more salutary aspect. The Obama administration has been pushing China to let the renminbi rise against the dollar, which would erode some of China’s formidable advantage in export markets. Rising wages in China have the same effect — while also giving Chinese families more spending power."
 
HT: Lyle Meier

11 Comments:

At 2/27/2010 11:53 AM, Blogger rufus said...

They'll still have to let the yuan rise a bit to counteract any ensuing inflation at home.

Mixed blessing to us. A little higher prices for Chinese goods, but, possibly, more jobs as our goods become more competitive in China.

 
At 2/27/2010 12:07 PM, Anonymous gettingrational said...

Gee, 1.3 billion people get potentially more spending power --then the work to get U.S. goods and services into China, through sales, has even stronger impeutus.

 
At 2/27/2010 12:57 PM, Anonymous Anonymous said...

The same article said that wages for a Chinese worker were $250 a month.

Quite a way to go.

 
At 2/27/2010 1:04 PM, Blogger sethstorm said...

The question is if they really get paid that or if the proverbial Audi-driving party boss works them to near-death for less.

 
At 2/27/2010 2:09 PM, Blogger PeakTrader said...

It seems, China's laid-off factory workers have infrastructure jobs provided by the $586 billion stimulus.

It seems to be a sound economic shift, for an export-led economy, to offset lower exports with more infrastructure.

However, it's also inefficient, e.g. producing empty office buildings, while the communist elites still benefit much more than the masses, e.g. all land in China is owned by the state.

 
At 2/27/2010 3:07 PM, Anonymous Benny "Tell It Like It Is" Man said...

Well, let's see---Detroit now hires new workers at $12 an hour...used to be triple that.
China's wages going up by 20 percent a year. I guess they will meet in 10 years or so.

Maybe America still has a chance.

 
At 2/27/2010 4:20 PM, Anonymous Anonymous said...

Well, let's see---Detroit now hires new workers at $12 an hour...used to be triple that.

Yeah, I can't wait to buy one of those Chinese cars.

Detroit? Shouldn't Detroit be a paradise? It's been run by the left for generations. It's been the recipient of hundreds of billions in government largesse. The unions have dominated the work force.

It's a progressive wet dream. What happened?

 
At 2/27/2010 6:02 PM, Blogger Colin said...

Is the point where people who loudly warned about the "race to the bottom" stand up and apologize?

 
At 2/27/2010 7:17 PM, Anonymous Benny "Tell It Like It Is" Man said...

Anon---

China is going to blow right past the USA.

Silly little arguments by the left or right will look like so much rearranging of the sunchairs on the deck of the Titantic in another 20 years.

If we have a solid manufacturing and energy programs, we might avoid becoming a footnote in history in 100 years, along with the Austro-Hungarian Empire.

But we have programs like the homeowner mortgage interest tax deduction, especially designed to encourage consumption, and the more consumption the richer you are, and the larger house you can buy. Fat City baby!

We support a gigantic parasitic military complex, in the face of no enemy nation states.

Forget the USA. Think about migrating to Thailand, New Zealand, Australia, or even Canada.

No wonder living standards are rising rapidly in China, while ours wallow around and we get deeper and deeper into debt.

But I want that tax deduction for homebuying, even my $5 million manse. I deserve it.

 
At 3/01/2010 10:59 PM, Blogger glenzo said...

From my experience living here in Hong Kong, is that rising wages are allowing workers to live closer to home. The labor shortages are for factories down here in Guangdong that rely heavily on migrant labor, labor that comes from far away provinces that live in dorm housing at the plant site. People prefer working closer to home and therefore, plants are being built in Szechuan and Hunan where many of the workers come from. They want to be closer to their parents/husbands/wives/children and are willing to take lower wages closer to home to improve on their family life.

I think that it is a good thing. So, there isn't a labor shortage, its a geographical labor problem.

 
At 3/06/2010 9:17 AM, Blogger dkmich said...

"It's a progressive wet dream. What happened?"

Bill Clinton happened. Takes a Democrat to screw a Democrat. Obama is delivering on what's left. Simply stop counting the number of jobs offshored, and the problem's solved.

When we get a real progressive in office, we'll let you know. If it was up to Obama to do civil rights, African Americans would still be worth 3/5 of a person. He doesn't have the votes. ;-)

 

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