Opinion

As China's wages rise, export prices may follow

(chinadaily.com.cn)
Updated: 2010-06-08 16:10

Chinese workers' increasing salaries will "ripple through the global economy, driving up the prices of goods ranging from T-shirts to computer servers," said an article in the New York Times on June 7.

The article revealed that with the "growing clout of workers in China's economy, soaring food and housing prices that have eroded the spending power of workers from rural provinces," many big manufacturers are moving to raise salaries of workers. Besides, factories have to pay more to attract workers since "demographic changes in China are reducing the supply of young workers entering the labor force," said Marshall W. Meyer, a China specialist at the Wharton School at the University of Pennsylvania.

Meanwhile, the Chinese government supported wage raises as a way to "stimulate domestic consumption and make the country less dependent on low-priced exports." It also encouraged "some export-oriented companies to invest in more innovative or higher-value goods and ease a widening income gap between the rich and the poor," said the article.

Although the "effects of rising labor costs" may force factories producing low-value goods to move to less developed regions, they won't affect high-end electronics, which "command high profit margins and because China has built a sophisticated infrastructure and quality-control system.," said Pietra Rivoli, a professor of international business at Georgetown University and author of "The Travels of a T-Shirt in the Global Economy."

This is China's ambition, said Mary Gallagher, director of the Center for Chinese Studies at the University of Michigan. She believed that although China won't "lose its manufacturing base because it's got a huge domestic market, it doesn't just want to be the workshop of the world. It wants to produce high-tech goods."