Higher Wages &Nbsp; Pressure Footwear And Other Enterprises Pfer Production Sites.

In May 10th, in the past thirty years, customers will ask Feng Guolun, managing director of Li&FungLtd., one of the largest production outsourcing enterprises in the world, to reduce WilliamFung.

Now, Feng Guolun said, the times are changing.

Li Fung Limited is located in Hongkong. Its indirect employment of tens of thousands of workers is rising rapidly.

Feng Guolun predicted that China's overall wage level will rise by 80% in the next five years, which means that the price of products will also rise.

Feng Guolun said, what we can see in the next 30 years is

Leaders of China and the US will hold an annual strategic and Economic Dialogue (StrategicEconomicDialogue) in Washington on Monday, which may involve inflation.

Estimating the exchange rate and debt issues is the main topic of the dialogue.

But there are signs that China is huge to the United States.

For decades, China's abundant labor force has depressed the prices of a range of products bought by Americans.

When American leaders accuse China of emptying its manufacturing industry, cheap DVD players, sweaters and barbecue appliances from China provide a consolation to consumers who are accustomed to lower prices.

In addition, China has reduced the RMB exchange rate and domestic exporters have gained a competitive advantage.

HalSirkin, a consultant at BostonConsultingGroup, said that domestic inflation in the US had been greatly suppressed because the United States shifted production to China and elsewhere, and the cost was only 20% or 30% of the domestic cost.

The company said the cost reduction has been over for years.

Li Fung Limited believes that the rise in wages stems from the "Foxconn effect" (FoxconnEffect).

Foxconn is the trademark of Hon Hai Precision Industry Co (HonHaiPrecisionIndustryCo.), which makes tablet computers iPad for Apple Corp (AppleInc.), and makes computers for Hewlett-Packard Co (Hewlett-PackardCo.).

Last year, a number of workers' suicides took place in a factory in mainland China. Foxconn had to defend its employees' treatment. Then, in order to improve working conditions, Foxconn raised the wages of workers by 30% or even more than that of Foxconn.

When Foxconn got a raise, Honda, HondaMotorCo. and other workers in Chinese factories also went on strike, demanding higher wages.

Since then, the Chinese government has begun to support wage increases for workers, to a certain extent not only to solve labor disputes, but also to stimulate domestic consumption to achieve economic growth and reduce dependence on exports.

Wage increases have an impact on Chinese and foreign companies.

In addition to wage increases, other factors are also pushing up commodity prices.

For example, Chinese workers began to buy more goods with higher wages, which to a certain extent led to higher prices of commodities such as cotton and crude oil.

Commodity prices are rising as the dollar weakens.

Moreover, the living standards of developing countries such as China are constantly improving, and natural resources are in short supply, and prices will remain high.

China's slow appreciation of the renminbi has also helped fuel high commodity prices, while western trading partners are eager for the appreciation of the renminbi.

The appreciation of the renminbi can make Chinese imports of raw materials such as iron and soybeans cheaper, and to a certain extent, curb domestic inflation.

But China's exports to other countries will be even more expensive.

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Sax, an economist and director of the Earth Research Institute (EarthInstitute) of the Columbia University, said that this view is correct that we have left an era prone to deflation and entered an era of inflation. ColumbiaUniversity

During the 30 years of economic growth in China, hundreds of millions of factories and towns were employed to absorb the surplus agricultural labor force in the rural areas.

Sax said that these surplus labor force has been completely absorbed in the past three to four years.

Many analysts predict that China's huge labour force will begin to decrease in the next one or two years, which is the result of the implementation of the family planning policy.

Others say there is a shortage of the most active factory workers between the ages of 15 and 34.

Ma Jun, chief economist of Greater China in DeutscheBank, said the group has been steadily decreasing since 2007.

It is necessary to raise the level of remuneration to enable a declining workforce to support a growing number of elderly people.

There is some debate about the impact of pay increases on foreign markets and the extent of their impact.

Garner, a Chinese strategist at MorganStanley Morgan, said that the price of US imports increased by about 7% this year. However, the proportion of these products in the total US expenditure is not enough to affect the inflation rate which is relatively low and only about 1.6% on the whole.

But after decades of real wage growth, many Americans who have already depended on cheap imported products such as polo shirts or power tools may see their purchasing power less than before.

There are still cheap labor in the inland areas of China far from the developed coastal cities, and the increase in productivity is also expected to ease the cost pressure brought by wage increases.

For example, Foxconn announced that it would expand operations in the inland areas near Chengdu, Wuhan and Zhengzhou, far from its coastal base.

Li Feng Group is encouraging suppliers to invest more in factories to improve labour productivity and product quality.

The effectiveness of these measures will be limited.

Some analysts say that even if productivity increases, the pace of growth will lag far behind the rate of wage increases.

Moving to the mainland will reduce wage costs, but it will also lead to higher traffic costs due to China's congested roads and railways.

In addition, the factories are located in the inland areas of China so that they can serve China's expanding domestic consumption market more effectively, rather than exporting to consumers in the United States and other countries.

Faced with the rising wage in China, some enterprises are pferring resources to other countries to lower costs.

Yuyuan Industrial (Group) Co., Ltd. (YueYuenIndustrial (Holdings) Ltd.), the world's largest shoe-making enterprise, has started pferring cheap shoe production from China to Bangladesh and Kampuchea.

Li Feng has been employed by Lining, a famous Chinese sports shoes brand (LiNingCo.), to help him find cheap production sites in China.

But Feng Guoguan said the wage gap between China and other developing countries will shrink, because China itself is a factor that prevents commodity prices from rising.

His view is in line with that of Boston consulting company.

With the relocation of factories to other countries, local wage increases will exceed China's past rate of increase, because the number of surplus labour they may have is less than that of China.

Apart from that, analysts say, because no other country can copy China's huge scale of production, logistics costs will account for more of the total cost as firms are forced to disperse their production in many countries.