Yesterday brought us another benign inflation number. If price relief is not coming from input prices (witness rising commodity prices, oil), or the relative price level (falling dollar), it must come from wages, due in part to the Chinese labor force and the deflationary wage pressure that it entails. But, are we on the verge of a shift?
GaveKal Research:
“In all of our meetings with clients, the most common shared belief is that wage costs in the US, or elsewhere, can not rise because of the fact that ‘200 million Chinese peasants are ready to move to Chinese cities and work for nothing. Or maybe even less’. We are also frequently told that this ‘army of unemployed Chinese workers’ will prevent inflation from rearing its ugly head and consequently justifies the low yields on US Treasuries.
Interestingly, the fact that wage growth in the US is accelerating...and is likely to continue rising in the face of a weak US $ and higher import prices, does not seem to phase our clients who claim that wages costs can only fall. And neither does the fact that wages across China are rising rapidly, or that industrialists are complaining about labor shortages. In recent months, all over the Pearl River Delta, and Yangtze River Delta, a number of factories have had to deal with striking workers, asking for increases in pay from the usual RMB600- 700/month to the slightly less inhumane RMB 1000/month (see China Misconceptions); and the workers have usually won out! And this for a simple reason: most regions suffer from a severe shortage of labor (the Guangdong government, the region behind HK, places its shortage of migrant workers at 2m souls). So the myth of China's ever-deflationary pool of labor, and of the 200 million unemployed peasants (which are only unemployed when the harvest is bad, i.e.: not this year) is melting before our very eyes.”
--UK
Writing an exact man,i admire you.
Posted by: air jordans | November 10, 2010 at 10:24 PM