The Price of Rice in China
Back in November (link) I listed out 12 things that are making the price of goods/services in China rise.
This week, the folks from Sourcejuice via China Success Stories (two good sites for people trying to source from China) listed out 4 price-increase issues in more detail with updates for 2008. Check it out here.
My original list included these 12 items:
RMB Appreciation
Inflation in China
Raw Material Price Increases
Increased Labor Costs
Growth in the Chinese Economy
Maturing Industries and Industrial Zones
Pressure to Slow the Chinese Economy
Low Price Competition
Increase QC and Testing Expenses
Poor Sourcing Decisions
Green GDP
The Poor US Economy
The Sourcejuice list includes these 4:
Reduced VAT
RMB Appreciation
Raw Material Price Increases
Increased Labor Costs
An additional couple of factors for the coming year are:
1) The Chinese government is actively trying to slow down their economy and the US is trying to speed up theirs. This means that money will be more available in the US (Yesterday’s huge rate cut being example 1-A) than it is in China. Thus making China relatively even more expensive.
And 2) The inconvertibility of the RMB and it’s appreciation make it a target for foreign investment, thus raising it’s value further; as noted here.
Among other things in this article, the increased price of exports is singled out as a policy measure (the decreased VAT above being a good example) that must happen again/more/further than it already has.
“To solve the problems of declining purchase power, and to burst the domestic asset bubble, according to experts, the Central Government should, first of all, adopt measures to streamline asset prices, elevate people’s income levels, and increase export prices. At the same time, it should strengthen its supervision of the influx of speculated funds overseas.”
Can you say “Good Morning Vietnam?” (SRI will be blogging from Vietnam later this year as part of a couple already-planned investment and sourcing trips.)