There has been much coverage in the press around the impact China’s prices will have on its competitive position within global markets. The Daily Telegraph reports that “China’s manufacturing wages have vaulted from around $1,000 annually 10 years ago, to $3,900 last year”. This would imply China is set to lose its position as the workshop of the world, with manufacturing switching to new low cost markets or back to the West.
However if you look behind the headlines the issue is far from black and white.
Everything’s relative – wages don’t just rise in China: Wages are increasing all over the Asian region, not only in China, and they are increasing in Europe too. Vietnam, for example, announced a 12.5% rise in their minimum wage in March. In the UK annual factory gate inflation is running at 5.1%.
Rising prices bring other benefits – improved workplace conditions, quality levels and environmental practices: China doesn’t only want to create a better life for their workers by offering higher salaries and other social benefits, but also is attempting to clean up its environment. This means shutting down unhealthy factories who use outdated and dangerous production methods, just to be competitive. For example around 2,000 companies in the cement, steel and paper industries have been shut down in the past two years due to outdated working practices.
Shutting down ‘cost driven’ factories also has a positive side effect in the form of rising quality levels, with the factories left more focussed on producing ‘quality for a price’
So in summary it is true that prices are rising, but the debate needs to be widened to factor in inflation in other countries, improving workplace conditions, improved environmental standards and rising quality levels.
This entry was posted
on Wednesday, August 25th, 2010 at 3:27 am and is filed under Hints and tips, News commentary.
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China’s rising prices – behind the headlines
There has been much coverage in the press around the impact China’s prices will have on its competitive position within global markets. The Daily Telegraph reports that “China’s manufacturing wages have vaulted from around $1,000 annually 10 years ago, to $3,900 last year”. This would imply China is set to lose its position as the workshop of the world, with manufacturing switching to new low cost markets or back to the West.
However if you look behind the headlines the issue is far from black and white.
Everything’s relative – wages don’t just rise in China: Wages are increasing all over the Asian region, not only in China, and they are increasing in Europe too. Vietnam, for example, announced a 12.5% rise in their minimum wage in March. In the UK annual factory gate inflation is running at 5.1%.
Rising prices bring other benefits – improved workplace conditions, quality levels and environmental practices: China doesn’t only want to create a better life for their workers by offering higher salaries and other social benefits, but also is attempting to clean up its environment. This means shutting down unhealthy factories who use outdated and dangerous production methods, just to be competitive. For example around 2,000 companies in the cement, steel and paper industries have been shut down in the past two years due to outdated working practices.
Shutting down ‘cost driven’ factories also has a positive side effect in the form of rising quality levels, with the factories left more focussed on producing ‘quality for a price’
So in summary it is true that prices are rising, but the debate needs to be widened to factor in inflation in other countries, improving workplace conditions, improved environmental standards and rising quality levels.
This entry was posted on Wednesday, August 25th, 2010 at 3:27 am and is filed under Hints and tips, News commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.