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 AppreciationInflation in ChinaRaw Material Price IncreasesIncreased Labor CostsGrowth in the Chinese EconomyMaturing Industries and Industrial ZonesPressure to Slow the Chinese EconomyLow Price CompetitionIncrease QC and Testing ExpensesPoor Sourcing DecisionsGreen GDPThe Poor US EconomyThe Sourcejuice list includes these 4:Reduced VATRMB AppreciationRaw Material Price IncreasesIncreased Labor CostsAn 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.)