Rising cost of China products a knock-on effects for the world
A Chinese vendor sells dried noodles at a street market in Shenyang, northeast China's Liaoning province on Saturday. China's central bank warned of still strong domestic inflationary pressure. As China's factory floors feel the pressure from spiralling costs, there is growing nervousness in the rest of the world that the Asian giant's next big export could be inflation.Photo: AFP
As China's factory floors feel the pressure from spiralling costs, there is growing nervousness in the rest of the world that the Asian giant's next big export could be inflation.
From air-conditioned US shopping malls to bustling African street markets and remote Asian villages, shoppers have become accustomed over recent years to the vast array of ultra-cheap Chinese goods on offer.
China's trade surplus last year reached 262.2 billion dollars, a more than 10-fold rise from 2003.
But now a confluence of factors, led by soaring domestic inflation that hit an 11-year high of 7.1 percent in January, is ramping up the costs of doing business in China, with potential knock-on effects for the rest of the world.
As China's currency has strengthened sharply against the dollar, the government has scrapped export tax rebates, while more stringent labour laws and even the ice and snow storms in southern and central China have further driven up costs.
"China's inflation is having a domino effect on worldwide inflation, especially in the United States," Li Huiyong, an analyst from Shanghai-based SYWG Research and Consulting, told AFP.
"In the past, (outside) inflation pressures in the US mainly came from oil prices because the US economy is highly dependent on crude oil. Cheap products from China and other developing countries helped to alleviate that pressure.
"Now Chinese goods are no longer as cheap it adds to the inflation pressure in the United States."
Nevertheless, while it is clear that doing business in China is getting more expensive, there is no consensus among economists about how much that will translate into higher price tags for Chinese-made products overseas.
And given the long and complex business chain between suppliers in China and overseas consumers, a rise in manufacturing costs does not mean that shoppers will immediately have to pay more for Chinese products.
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