Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China’s Inflation Rate Nudges U.S. Retailers to Look to Other Asian Suppliers

Economics / Inflation Feb 01, 2011 - 08:29 AM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleKerri Shannon writes: China's inflation rate is climbing faster than expected, triggering a wave of price increases across the country and spurring foreign companies to search elsewhere for suppliers.

China's consumer price index hit 4.6% in December and 5.1% in November - it's highest level in 28 months. Annual inflation for 2010 was 3.3%, which is above the government's 3% target rate.


The Bank of Communications last week announced China's inflation rate would climb above 6% by midyear, pushed by rising food prices, labor costs and production expenses.

"China faces relatively big pressures on prices in 2011, especially in the first half. There are many factors driving up prices and inflation risks cannot be ignored," Bank of Communications said in a research report.

Beijing has raised interest rates twice and increased banks' holding requirements over the past year to try and rein in prices.

Central bank governor Zhou Xiaochuan said Sunday that inflation was rising more than estimated and the country might lift banks' reserve requirement ratios again to tighten the money supply.

"Inflation is still higher than many people expected. It may be still going up a little, so we should keep vigilant on that," Zhou said at a meeting in Japan.

China's inflation rate surge is affecting the prices of inexpensive clothing and retail products and slowing down U.S. imports as U.S. retailers try to negotiate down climbing manufacturer prices. Some U.S. and European companies have trimmed their shipments orders for spring due to higher product prices. The shipping industry is also suffering as container-shipping lines have had to cancel planned trips and reverse rate hikes due to the order cutbacks.

A survey last week by trading services company Global Sources Ltd. (Nasdaq: GSOL) reported that 54% of buyers plan on expanding their supplier base to Vietnam and India as China's prices continue to climb.

"Given the changing price point of China products, China exporters must work harder to market themselves and justify their higher prices in terms of service, product quality or production volume," said Craig Pepples, Global Sources' president of corporate affairs.

Vietnam-made apparel is 30% cheaper than China-made clothing, luring U.S. and EU-based retailers away from Chinese exporters. Thailand is also an attractive alternative with 30% of survey respondents saying they would increase sourcing from that country.

Luxury accessory company and U.S. retailer Coach Inc. (NYSE: COH) last week announced it was initiating a plan to shift its product reliance on China to other Asian nations like Vietnam and India. The company wants to reduce its China output to less than 50% from 80% now. The company said it would take four years to fully complete the shift.

The reduction in Chinese exporters' competitiveness could trim the $275 billion trade surplus the country has with the United States. China may decide to let the yuan, or renminbi, rise in value compared to the U.S. dollar to limit rising inflation.

Chinese economists last week warned China's People's Daily Online news outlet that inflation could be controlled this year but the country should watch out for stagflation. He Keng, deputy head of the Financial and Economic Affairs Committee of the National People's Congress, cited high inflation, property price bubbles and income gaps as issues threatening the country's economic growth in 2011.

Chinese consumers are facing frequent price boosts from companies and retailers that are compensating for rising costs.

McDonald's Corp. (NYSE: MCD) and Starbucks Corp. (Nasdaq: SBUX) have increased their sales prices for food and beverages in China. China's food inflation rate is up to 9%, according to Reuters. Rising food prices have been met with increasing public frustration over the government's lack of action.

"Public discontent is emerging in Asia's largest emerging economies, India and China, threatening to derail the region's growth prospects," Matt Robinson, a senior economist at Moody's Analytics, said in a report.

China put price controls on food in mid-November, but some state media have labeled those controls as ineffective.

China's property prices are the most disconcerting. Housing prices surged by more than 20% last year and are still climbing. The Chinese government last week raised the down payment requirement for a second-home purchase to 60% from 50%, and started experimenting with new property taxes.

"When you see the type of growth rates that these markets are experiencing, the whole area of inflation is one that really does need to be watched carefully," Denis Nally, chairman of PricewaterhouseCoopers, told Reuters. "It's one of the reasons that the number one threat to this recovery that CEOs are talking about is overall economic instability."

To offset rising prices for consumers, China's cities and provinces have started raising minimum wages. Popular industrial site Guangdong Province announced its cities will raise minimum wages by an average of 18.6% effective March 1. Beijing plans on raising pay 20% and Shanghai by 10%.

Some companies have tried moving their factories inland, where pay rates are generally lower than coastal cities, but the savings are often eroded by increased transportation costs.

Source : http://moneymorning.com/2011/01/30/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in