Western Profits Wilt on China’s Surging Wages

As wages rise in China, companies of the West recognize that they cannot pass higher costs of manufacturing electronics or clothing onto their consumers who hold their purses tightly, amidst worries about the recession. “Reliance on Chinese plants is suddenly proving double-edged,” observes Ambrose Evans-Pritchard for the Telegraph. Some companies plan for reduced profits or shifting production closer to large customer bases in the US or to nations where wages are still low like Bangladesh or Vietnam. China has resisted reevaluation of its currency, but rising wages contribute to a similar economic outcome by reducing exports. China confronts difficult economic choices in trying to maintain balances in labor, property prices and revenues. If China tries to combat the exodus by manipulating its currency to even lower levels, Evans-Pritchard warns, that could add to dangerous overcapacity, imbalances and economic bubbles. – YaleGlobal