Inflation is the next big thing in Europe?

A migrant worker looks at recruitment notices at an odd-job market in Qingdao, East China's Shandong province, on Jan 12. Provided to China Daily

"In any case, rising import prices will immediately enter into inflation expectations and apply an upward pressure on interest rates and also on wages," says Loechel, adding that rising inflation paves the way to higher interest rates and that in turn will "damage growth, employment, and income that is needed to overcome the fiscal crisis".

Media Eghbal, Country Insight Manager at Euromonitor International, an international market intelligence researcher, agrees and says European consumers will "certainly feel the effects of China's rising labor costs through the higher end cost of Chinese goods".

"Potentially the era of cheap Chinese goods will come to an end," says Eghbal, noting that, however, it will not be the only reason for rising inflation in Europe, as currency values and worldwide food and energy price hikes also play a role.

"Countries that have been hit by falling currency values after the global financial crisis will feel the effects more as imports become more expensive. European consumers have also been hit by severe government austerity measures where rising taxes and pay freezes or cuts are squeezing disposable incomes. Food and energy prices are also on the rise. China's rising labor costs will not be the only reason for rising inflation in Europe," Eghbal says.

But Chris Rowley, director of the Centre for Research on Asian Management, Cass Business School of City University London, says the final overall effect of cost increases on end consumers is more subtle and the impact of China's rising labor costs on European inflation may be minimal.

"There are simply too many other mark-ups along the way, from transportation costs to sales staff wages that affect European retail prices of Chinese goods. The increased prices of Chinese goods will show up in European prices, but only modestly."

He explains this is partly because the prices consumers pay reflect not only the price of the Chinese goods, but also the local retail and distribution costs, which are often a large portion of the retail price.

"Alternatively, wholesalers in fragile economies may be forced to accept lower margins themselves to keep prices low. In any case, consumer durables account for only a small amount of consumer price inflation."

His view is echoed by Zhao Zhongxiu, an economics professor at the Beijing-based University of International Business and Economics, who believes inflation imported from China to Europe may be quite limited.