Thursday, February 28, 2008

China Raising Minimum Wage

Why do you care? Again, it's all about exporting inflation to you. (but not to worry says our Fed chief) [Rising Factory Costs Erode China's Edge], [China's Inflation Hits American Price Tags]

In a global world, me must keep in touch with what is going on. As I've been stating lately, capital will move from Chinese coasts (where those "rich Chinese" who make $0.85/hour), to inland poorer areas... and then once those people start making massive waves like $0.33/hour... we'll move those factories over to Indonesia and Vietnam. Always a labor force to exploit on this Earth so we can buy things 4 cents cheaper at Walmart.

How much is $120 a month? $4 a day. Or $.50 per hour. Remember, that is the RICHEST province in the country. But we can do much cheaper in Vietnam folks, let's get those factories out of China - those people are making too much money!
  • In an effort to calm grousing consumers as prices rise to 11-year highs, China is raising minimum wages across the country, a move analysts fear could further stoke inflation.
  • Guangdong, China's richest province, said it plans to raise minimum wages by as much as 18% in some cities starting April 1. The decision followed similar actions in other areas, notably the major cities of Shanghai and Beijing.
  • The wage increases, aimed at relieving food and other price pressures, could instead fuel inflation, analysts said. Higher wages are also likely to raise prices of U.S. imports from China, and possibly reduce China's attraction as the world's manufacturing center. (all things we've been talking about since last summer)
  • As an example of higher prices, McDonald Corp.'s China stores recently raised the chain's Big Mac price to 12 yuan ($1.7), up 14% from just seven months ago, reflecting higher meat and wheat prices.
  • In December, Kentucky Fried Chicken, owned by Yum! Brands Inc. also raised prices in its China stores for the first time in more than three years.
  • Since last year, Chinese residents have seen prices of food and other staples increase more than their pay checks, a factor analysts said could potentially unleash social unrest. In light of that, some fear the minimum wage increase came too late. (I always wonder why we never have social unrest here, we just seem to grin and take it - might just be the American mind set of soldiering through, in thick or thin. Now in this country we won't be able to get wage increases to offset inflation because of the threat of moving jobs away from the US - so unlike the 70s when people demanded higher wages to compensate for inflation that won't be so easy this time around - gonna be very interesting to see how it plays out)
  • Guangdong will increase the province's minimum wages by an average 13% on April 1, the province's labor bureau said in a news release last week. The southern China province produces about 13% of China's economic output, the most among the country's 32 provinces.
  • Minimum wages in the capital city Guangzhou will rise to 860 yuan ($120) per month from 780 yuan, an increase of 10%. Wages of other cities in the province will also get a boost, with those in some inland cities up nearly 18%.
  • "The current consensus view is that this year's inflation should peak in the first quarter (that's when Ben says for us too!)," said Lan Xue, an analyst at Citigroup, in a separate research note. However, Xue said "we are getting nervous that not only may we not see a moderation in the second quarter," but that inflation could even continue rising into second half or even 2009. (I doubt it, that would go against what Ben says! Ben would not deceive us!)

Again, we read these stories from country after country. Middle East, Europe, Asia, North America. It's the same story over and over; just change the name of the country. But it does not register with those in power in this country. In fact they continue to preach the exact opposite of what is happening on the ground. Amazing to watch. But hey, we can continue to prop up asset classes (equity market included) with paper money, so we can keep the sheep distracted. Thank god there is no such think as the Dow Jones Inflation Average to keep track of inflation on a day by day basis, or people might notice what is really going on behind the scenes.

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