Chinese GDP grew 9.6 percent year on year in the third quarter of 2010, according to the National Bureau of Statistics. The figure was down from 11.9 percent in the first quarter and 10.3 percent in the second quarter.

In late October, material producers led the way as Chinese stocks reached a six-month high on Monday with the benchmark Shanghai Composite Index. The onset of fiscal tightening, however, heralded by China’s central bank raising the benchmark interest rate by 25 basis points, could see the economic growth slow in the fourth quarter, according to many analysts, with inflation expected to remain high into 2011.

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 This means shutting down unhealthy factories who use outdated and dangerous production methods, just to be competitive.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around 2,000 companies in the cement, steel and paper industries have been shut down in the past two years due to outdated working practices.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.

The Index revealed that Chinese manufacturing output contracted from 52.1 in June to 51.2 in July (figures of 50 or above represent growth), the first such contraction since the economy began to rebound from recession in March 2009. The Chinese Federation of Logistics and Purchasing and the National Bureau of Statistics concurred with the figures.

The reason for the slowdown is being attributed to the government’s greater controls on bank lending, which have forced Chinese banks to reduce lending to businesses amid renewed fears of significant loan defaults. The tightening of bank lending has stifled booming property prices and affected manufacturing. The Chinese government has also reigned in its stimulus spending on construction projects, and placed new controls on investing in high-energy consuming and polluting factories. Analysts are split as to whether this represents just a short-term slowdown in Chinese manufacturing, or is a sign of slower growth to come later in 2010.

Manufacturing in China accounts for around 47 percent of GDP, but rising costs, particularly for wages, have prompted speculation that cheaper labour locations, such as Vietnam, Sri Lanka, Bangladesh and some countries in Africa, are poised to benefit from a transfer of manufacturing investment away from China.

This may happen to some degree, especially in highly cost-sensitive products manufacturing, but larger operations targeted at increasingly confident Chinese consumers, rather than produced for export, seem determined to maintain their presence in China. After all, retail sales in China for the first five months of 2010 rose 18.6 per cent year on year, according to the National Bureau of Statistics.

The article published by People’s Daily, states that it now costs “nearly four times as much to employ a Chinese worker in the garment sector than someone from Vietnam.”

By contrast, the average annual manufacturing wage in China’s Guangdong province “increased by 144 per cent from 1998 to 2008,” according to figures from the Economist Intelligence Unit. Wages in lower-cost provinces are rising even faster in percentage terms – up by 263 percent in Hunan province during the same period, and by 258 percent in Guizhou.

Total sales in the world’s largest auto market increased 47 percent year on year in the first half of 2010, according to the China Association of Automobile Manufacturers. This equates to 9.02 million vehicles sold between January and June, of which 3.18 million were “home-made passenger vehicles”, according to the CAMM.

The top five selling Chinese carmakers in the first half of 2010 were SAIC Motor, Dongfeng Motor, Changan Automobile, First Automobile Works, and Beijing Automobile Works. Meanwhile, General Motors’ vehicle sales in China during the first half of outstripped those in its home market for the first time in history. It sold 1.21 million units in China, and 1.08 million in the United States.

There is some concern, however, that Chinese auto manufacturers are expanding output too fast, despite the fact that more and more Chinese are owning their first car or trading up to a newer model. Auto output in China also rose significantly, up 49 percent year on year, for the first half of the year, but car sales in June slowed compared to previous months, prompting fears of possible overcapacity towards the end of the year.

The June PMI fell 1.8 percent month on month, to 52.1 percent. It has now registered above the 50 mark for 16th consecutive months, since last dropping below in February 2009. The Chinese PMI dropped to an all-time record low of 38.8 percent in November 2008, as the global economic crash impacted on both Chinese manufacturing order books and output levels.

Ten of the PMI’s sub-indices, including production, new orders and purchasing prices, all fell in June. The overall slowdown was attributed to “a moderation in the pace of China’s manufacturing expansion because of the country’s macro regulation policies and slowdown in global economic recovery,” according to the National Bureau of Statistics.

But who would have guessed that an instrument promoted as distinctively South African was mass produced in China? According to Chinese state media “up to 90 percent of the vuvuzelas in South Africa were made in China.”

One of the manufacturing companies quoted in the report, Zhejiang-based Jiying Plastic Products, said it had sold more than one million vuvuzela horns since April. The report added that “nearly all of the vuvuzelas blown by World Cup fans come from five factories in Guangdong province and Zhejiang.”

The horns are exported “at prices ranging from RMB0.6-2.5,” state media writes, and are sold for between RMB18-53. The good news for manufacturers is that the vuvuzela craze may endure beyond the World Cup – London Mayor Boris Johnson has hinted that the buzzing bee sounding horn might be welcomed at the London Olympics in 2012.

Asian stock markets reacted negatively to the news on fears that sluggish global demand for Chinese manufactured products in May maybe indicative of a further slowdown in the months ahead.

The official China Federation of Logistics and Purchasing managers index dropped to 53.9, from 55.7. While this still represents growth (for the 12th consecutive month), the rate of growth was below many analysts’ predictions. The official export orders sub-index fell to 53.8 in May, from April’s 54.5. Differing slightly from the official government statistics, the HSBC China Manufacturing Purchasing Managers Index dropped considerably from 55.2 in April to 52.7 in May.

Chinese media said the slower rate of manufacturing output growth showed “that the government’s tightening measures, including a crackdown on the property market, are starting to impact manufacturing activity.”

The three nations have agreed to collaborate on a feasibility study – to be completed by 2012 – on the potential benefits and disadvantages of entering into a trilateral free trade zone, which would “eliminate tariffs and quotas, allow a faster flow of goods, as well as lower manufacturing costs and product prices,” according to Chinese state media.

Such a free trade zone between Asia’s first, second and the fourth largest economies – which together account for 70 percent of Asia’s GDP – still has many obstacles to jump.

China is South Korea’s largest trade partner and Japan’s second-largest, and annual bilateral trade between the three nations totals around USD200 billion. “This is considered as a catalyst for building the free trade zone,” Chinese media states. The game-changer may be that a three-way free trade zone would easily outperform any economic group comprised of two of the three nations. Watch this space.

Haier achieved RMB16.28 billion of its RMB33 billion 2009 revenues by selling refrigerators, plus RMB8.65 billion from air conditioning unit sales and RMB2.71 billion from freezer appliances, according to its annual report released to the Shanghai Stock Exchange.

One reason cited for the increased sales during the global recession was the Chinese government’s RMB6.3 billion rural subsidy programme which was designed to boost purchases of home goods such as televisions, refrigerators and washing machines in poorer rural areas. “We will continue to expand our sales network especially in the rural areas,” says the Haier report.

The Qingdao headquartered appliance maker, which employs around 60,000 people worldwide, was last year ranked as the world’s leader in refrigerator sales, with a 12.4 per cent of global sales, according to Euromonitor International.