Made expensively in China

28 February 2008 By Martin Hutchinson

China’s higher minimum wages, inflation and currency appreciation are pushing up global prices. For decades, cheap Chinese manufactured goods have been a major deflationary force. Now, Chinese cost inflation is reversing their effect.

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Guangdong, economically China's most important province representing 13% of its gross domestic product, plans to raise its minimum wage by an average of 13% on April 1; minimum wages in its capital city of Guangzhou will rise to RMB860 ($121) per month from 780, while inland cities' minimum wages will rise by more, some by 18%.

Four provinces raised their minimum wages by 20% or more January 1, with Tibet raising its minimum wage by 50%. Average minimum wages rose by 15% in 2007 and are expected to rise by 21% in 2008, according to Citigroup.

The renminbi traded at 7.11 against the dollar on February 28, up 17% since the currency floated in 2005 and 9% over the past year.

China's inflation rate was 7.1% in the year to January, the highest in 11 years.

Vietnam's inflation rate was 15.7% in the year to February 2008, the highest in more than a decade.

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