China upping prices

China upping prices

Shanghai : China | Oct 20, 2010 at 7:06 PM PDT
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India should strengthen its frontier with China: RSS

"All of our prices including materials, labour and financing have gone up recently..." said my Chinese supplier as she hit me with a 50% increase in pricing. She wouldn't budge from there. It has forced me to look for alternative suppliers outside of China.

While China is probably the main culprit in the upsurge in commodity prices as of late, it will...and is...passing on these prices to the rest of the world. In many instances, it is also hoarding supplies of important resources for internal present and future consumption, such as rare minerals.

The idea that cheap made-in-China products might be a thing that history books are made of, has me quite worried as to the future of world wealth transference and its implications. The U.S. might be exporting its problems by way of a weak dollar but inflation could force it to raise its interest rates at a time that would kill any "real or imagined rebound" in the economy.

Higher wages for Chinese workers can only lead to higher spending for them. Their consumption will mainly be internal and so, in effect, would end up being a form of trade advantage in a possible forthcoming trade war.

While most might say that this could also lead to inflation in China, I would tend to disagree: I pay $XXXX to have a product made there but I pay almost the same, on top of that, to have it transported to my warehouse outside of China. They don't have to pay transport charges (negligible) when dealing within the country so prices wouldn't necessarily go up for them. Japan not only has to deal with a shortage of cerium but they might also lose supremacy of its flat panel TVs and hard disk drive market. The price of rare minerals are expected to grow by 760% in the next 5 years alone!

Add to all of this the fact that higher education inscriptions by the Chinese, within China and around the world, has been growing at a break-neck speed since their one-child-per-family law came into effect, and that they have a knack for emigrating successfully to the rest of the world...and you have the quote "and the meek shall inherit the earth..." take on credible and worrisome proportions.

1.6 billion people can change the world!

The biggest transfers of wealth have historically taken place during depressions. Don't expect this time to be any different. Even if we are not "technically" in a depression yet.

History does repeat itself...only the actors change...

Marcelo Montecinos is based in Santiago, Metropolitana, Chile, and is a Stringer on Allvoices.
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