When buying in China becomes both cheaper and more expensive
Prosperous China is in the news again with a sustained high inflation rate, rising incomes and stronger regulations. Surprisingly, as a consequence, producer prices are decreasing while consumer prices are rising. Three major factors make buying in China becomes both cheaper and more expensive.
China’s success story: better pay
Labor rates and inflation are on the rise in China. The internal costs of hiring, training and retaining professional staff have increased over 10% year after year in the past 5 years. Of course, geography plays an important role in that.
Development of the regions: greater distances
The minimum wage in Guangdong province more than quadrupled in 10 years. So, the incomes and salaries have increased drastically in places with highly skilled employees.
Anyone wanting to employ skilled labor will face increasing salaries: in the industrialized cities the cost of life is rising quickly.
Consequently many manufacturers move to cheaper provinces to find cheap, unskilled labor in an effort of drop production costs. However, all of the others involved (i.e.: logistic companies, third party inspection companies, etc.) see their costs increase: bringing skilled professionals to factories in the middle of nowhere is a major cost driver. While modes of transportation are becoming faster and convenient, they are also more pricy, employees usually get compensation if traveling late at night and bonuses in addition to a salary.
Sustainability and compliance: stronger regulatory supervision
Climate change, contamination of drinking water and the air, corruption and a reputation for low quality products are all issues that are being tackled by the Chinese government. Stricter legislation and closer supervision go hand in hand. The QC industry, for example, is now required to undergo auditing by officials more frequently. In addition, they are required to provide further documentation.
Congratulations to the Chinese for the achievements made in the past 10 years in terms of wealth, quality and sustainability.
And you: how do you deal with the fact that buying in China has become both cheaper and more expensive?
Photo from commoditytrademantra.com
