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Wage Inflation Rampant In China As More Provinces Plan Minimum Salary Hikes

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Wed, 01/26/2011 - 16:31 | 907110 Jason T
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Americans slave labor wage made goods about to go up even more.. expect even more debasement in quality of products sold and your monopoly big box store located near you. 

Wed, 01/26/2011 - 17:26 | 907309 dlmaniac
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You can tell China will someday go down as well now that they start to adopt Western welfare junk such as minimum wages.

Wed, 01/26/2011 - 17:33 | 907338 EscapeKey
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What's the alternative over there? Riots?

Wed, 01/26/2011 - 18:01 | 907448 tmosley
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Sever the dollar peg.

There is NO reason for them to cripple their economy for the sake of their exporters.  

Thu, 01/27/2011 - 00:34 | 908505 Popo
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Their economy is their exporters.

And of they sever the peg, which way do you believe the yuan would go?

Wed, 01/26/2011 - 20:35 | 907854 zaphod
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But the People's Daily last week during Hu's visit to Washington declared China to be the #1 power in the world which all other countries should bow down to.

That must mean that they plan to match the western world's minimum wage of around $15K, or 100x over their current minimum. Good luck with that Hu.

Wed, 01/26/2011 - 16:32 | 907113 Rogerwilco
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And as everyone knows, higher wages always lead to lower prices. The Mentos just fell into the bottle of soda.

Wed, 01/26/2011 - 16:33 | 907118 raya123
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This is one reason why QE will NOT result in higher equity prices for much longer.

Wed, 01/26/2011 - 16:40 | 907142 johnnymustardseed
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The FED is buying stocks, it will gone on till the FED is dead

Wed, 01/26/2011 - 16:42 | 907147 johnnymustardseed
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it will go on till the FED is dead

Wed, 01/26/2011 - 16:50 | 907175 raya123
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The Fed is not buying stocks, the banks that receive the Fed's money are buying stocks.  When companies show reduced profit margins as a direct result of QE induced inflation, those banks will put their money elsewhere in a hurry.  

Wed, 01/26/2011 - 16:34 | 907123 dick cheneys ghost
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newby here, what happens to US when china crashes? thanks for your answer

Wed, 01/26/2011 - 16:43 | 907150 Dr. Porkchop
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Robo will post bullish charts.

Wed, 01/26/2011 - 16:44 | 907158 DonnieD
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and Harry will agree with his bullishness.

Wed, 01/26/2011 - 18:22 | 907520 Quinvarius
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And Nic Lenoir will call the tops in gold and the Euro for billionth time.

Wed, 01/26/2011 - 16:45 | 907160 Internet Tough Guy
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Ponzi is dying; if china raises prices Americans can't buy stuff. If American consumers spend all their money on commodities they also can't buy Chinese stuff. No cheap stuff, no dollar recycling.  

Wed, 01/26/2011 - 16:47 | 907165 Dr. Richard Head
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With China imposing wage and price controls I assume we can see shortages of vital goods needed by the Chinese people, that is if history repeats in the face of wage and price controls.  Secondly, Chinese minimum wages are being forced higher which should result in margin squeezes of the Chinese producers.  Sooner or later those higher input costs will translate to high prices of Chinese exports.  Americans will see this show up in the cost of good bought from China.  It's not that China will crash, it is that their currency is, just like the US, being inflated to make up for government expenditures that could not possibly be covered by taxes. 

We are experiencing the race to the bottom in currencies.  The question is then which country has their respective currency crisis first? 

Wed, 01/26/2011 - 16:54 | 907194 DonnieD
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Investment theme for 2011, Life Insurance policies on FoxConn employees.

Wed, 01/26/2011 - 17:00 | 907218 sushi
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It is hard to get good data but what I have seen is that Chinese value added is around 5% of final selling price of the good in the USA.

I agree that the Chinese producer margins will get squeezed if they are unable to pass costs through. But I think we will also see US margin squeeze due to higher input costs, higher transport and the cost of labour. THe US workers who still retain thier jobs are likely the higher priced marketing, legal, logistics, and design functions and they will start demanding they be made whole on their increased cost of energy, transport and food.


I doubt there is much room for further removal of labour costs. US firms all slimmed down over a year ago and this is what is giving rise to the "green shoots" qrtly reporting. But by 2H I think we start to see serious cost push inflation in US. I eagerly await seeing what "Bubbles" Bernanke does during his 15 minutes devoted to redressing the problems created over the past 20 years.

Wed, 01/26/2011 - 17:09 | 907246 topcallingtroll
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China dies first. Food inflation harms most the countries where a higher percentage of family income is spent on food. Die china die.

Wed, 01/26/2011 - 17:41 | 907376 sushi
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And if your family income is food stamps?

I think there are 47 million Americans who would like to correct your understanding of global inequities.

Wed, 01/26/2011 - 18:15 | 907496 SilverRhino
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There's a difference in being on food stamps and spending 60% of your income for cold raw foods like grains, meat and other completely unprocessed products.  

And the bottom 13-15% of the US population is going to get hammered anyway.  (~47 million)

Not saying that QE is right, but we're definitely in a hot economic war at this point with China and the rest of the currency pegged nations.

Thu, 01/27/2011 - 11:18 | 909296 AnAnonymous
AnAnonymous's picture

the rest of the currency pegged nations.


Could a list of these countries be provided?

Because it looks like very a posteriori. A country has issues, that is because it has a pegged currency.

Providing a list before any event would work better.

Wed, 01/26/2011 - 16:52 | 907186 raya123
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China started its downtrend several months ago, check the charts of their index.  We will be following shortly.

Wed, 01/26/2011 - 16:52 | 907187 Black Forest
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Recession, depression.



Wed, 01/26/2011 - 16:36 | 907128 williambanzai7
williambanzai7's picture

The great circle of Ponzi life

Wed, 01/26/2011 - 16:39 | 907137 Yen Cross
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Hey they gotta sell all that GHOST property. Remember the GDP based on to some extent the QE PACKAGE THAT pboc PUT IN PLACE. Speculation=empty cities. 1.6 billion and growing.

Wed, 01/26/2011 - 16:39 | 907138 johnnymustardseed
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Unionize!!! That will help level the playing field

Wed, 01/26/2011 - 16:43 | 907145 Cognitive Dissonance
Cognitive Dissonance's picture

We are confident America's workers will be delighted to know that Bernanke's massively destructive monetary policies are finally resulting in higher salaries... In China.

Typical of the USA.

America comes down with a raging case of VD and everyone else suffers before America does.

Wed, 01/26/2011 - 16:50 | 907176 tmosley
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They should have made us use a condom, clearly.

Wed, 01/26/2011 - 17:16 | 907268 EscapeKey
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Well, it's nothing in comparison so what will happen to the States when major countries start dropping the Dollar on a large scale.

Wed, 01/26/2011 - 16:43 | 907146 Spalding_Smailes
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China Inflation And The Impact On Your Business

By:  Steve Dickinson - China Law Blog

There are two related economic issues that are of primary importance to ordinary Chinese people. The first is the inflation in prices of basic necessities such as housing and food. The second is the lack of wage growth in the manufacturing and service sectors. Today’s China Daily (January 4, 2011) featured five separate articles dealing with these issues.


..... The headline article of today’s China Daily reports that the PRC All China Federation of Trade Unions (ACFTU) is pushing for legislation that will establish the formal rules for mandatory collective wage bargaining in China. While China mandates that all businesses permit the formation of unions, there is no corresponding set of national laws or regulations concerning mandatory collective bargaining. However, a number of local governments have adopted local rules and “guidance” concerning mandatory wage agreements. The ACFTU assert that where collective bargaining has been used over the past 10 years under these local programs, worker’s wages are 15% higher on average than wages for workers in the same sector without collective bargaining. In a related article, the China Daily reports that the Beijing Municipal Federation of Trade Unions has adopted a three year plan to establish collective wage bargaining in 80 percent of the city’s unionized enterprises. Once Beijing takes the lead, other local governments are certain to follow, even without any national legislation on the issue."................




Wed, 01/26/2011 - 16:43 | 907152 John McCloy
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  The plan to make items for cents on the dollar and sell them to American debt cattle works wonderfully until China realizes that nobody else can compete with their costs so they raise them to stave off domestic unrest and grow wealthier because we are in a box. 

    This plus rising commodity costs make it inevitable for the eventual attempt to pass on costs to American consumers. Ben's window to print to prosperity is closing at a quicker rate every single day.

Fri, 01/28/2011 - 07:55 | 912369 Dollar Bill Hiccup
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The "Consumer" is dead. Long live the Consumer!

The question is, what will replace him. Gary Cohn of Goldman Sachs tells the FT that hedge funds are dangerous because they will not be regulated and the logic I suppose is that Goldman Sachs, the hedge fund, should be allowed to expand in its masquerade as Goldman Sachs the Bank, unfettered by the burden of having to explain God's work to anyone except regulators who are on the payroll. The recent news out of God's Bank is the elevation of a new head of Emerging Markets, which again the FT explains is where the Divine Bankers wish to convert the heathen into true, god fearing .... consumers!

Stop buying crap and break the chains. Cold Turkey on the addiction to Stuff. Then the Celestial Minions over at Goldamn can go ... stuff it.

Wed, 01/26/2011 - 16:54 | 907164 hambone
hambone's picture

This is what we (corporations doing biz in China) have been seeing now for 6-9 months...but it is still picking up pace and same story accross Thailand, Vietnam, Indo...the inflation coming our way has to go full circle from our dollar printing to periphery inflation to periphery labor hikes back into the pipeline of product...but takes anywhere from 3, 6, 18 months till the full pricing impacts hit the commodities, then the suppliers, then the factories, and finally hit the corporations contracting out their manufactuing in Asia.

That's where we are now squarely, corporations left with the choice of maintaining top line or bottom line.  Margin or volume.  Can't have both in the US, EU, Japanese stagflationary markets (it is possible in the BRIC's and other emerging nations where there is true inflation).  If you raise price, you lower your volume.  Maintain retail price and margins are squeezed.  This is going to get real ugly cause corps have already off shored, outsourced, downsized, reduced capex (except in the service of the previous).  Now the trend of not just down sizing but moving all together may come on the table for HQ's currently in EU, US, etc. 

Wed, 01/26/2011 - 16:58 | 907210 RKDS
RKDS's picture

Sorry, but how about we just let the vapid pin-striped theives run away and cry to mommy commie like the little bitches they are?

Wed, 01/26/2011 - 16:47 | 907166 Spalding_Smailes
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Wed, 01/26/2011 - 16:51 | 907183 Dr. Richard Head
Dr. Richard Head's picture


Wed, 01/26/2011 - 17:09 | 907247 MsCreant
MsCreant's picture


Wed, 01/26/2011 - 17:17 | 907272 EscapeKey
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About the best post I've ever seen from you! :)

Wed, 01/26/2011 - 23:21 | 908368 Calmyourself
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Agreed, good stuff built a picture and illustrated it, nicely done, hambone..

Wed, 01/26/2011 - 16:50 | 907177 OptionsHedge
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Nice to know the poor of the world are getting raises.

Wed, 01/26/2011 - 16:57 | 907207 hambone
hambone's picture

They are losing pace even faster than we - they have true inflation of food, energy, etc. and wage increases are nowhere near to keeping up.  Talk to Chinese here and when in China and they'll tell you the real story.  Average $6000 wages in GZ or SH but food costs are comparable w/ US food prices.  Not likely to see many fat Chinese, Vietnamese, or Thai's anytime soon.

Wed, 01/26/2011 - 17:23 | 907299 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Good digging Spalding!

Thanks for sharing.

Wed, 01/26/2011 - 16:55 | 907197 Temporalist
Temporalist's picture

I am waiting for Steve Liesman to explain how increased Chinese wages are beneficial for U.S. consumers by using props to show that when jaws drop from product price increases more air is inhaled thus making people lighter, happier and healthier, as well as the benefit from losing weight as they can afford less food.  Also since Walmart is being sued for price manipulation all the uber-wealthy customers that visit will be happy that isles are empty of the poor that normally would be shopping there.

Wed, 01/26/2011 - 17:02 | 907225 hollywould
hollywould's picture

i certainly wouldn't mind seeing some air let out of the sails of the chinese economy ... higher rates, higher wages, lower margins, increasing yuan, lower exports from increasing prices (whatever it takes) -- even if it only slows their gdp to 5 or 7%, markets worldwide initially get dinged, but US would recover from lower commidty costs ...

Wed, 01/26/2011 - 17:04 | 907236 topcallingtroll
topcallingtroll's picture

Fuck those chinese peggers..they can stop the inflation at any time by floating the yuan...stealing our industrial base with currency manipulation and mercantilists policies is no longer pain free is it you chicoms?

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