China: Cheap no more?

That’s the theory of some observers of China’s economy.  As the Economist points out, even some big players in China’s rise as a source of cheap manufactured goods think the game is up:

“IT IS the end of cheap goods,” says Bruce Rockowitz. He is the chief executive of Li & Fung, a company that sources more clothes and common household products from Asia than perhaps any other. . . .

Nothing can replace the Chinese miracle. “There is no next,” says Mr Rockowitz. Prices will now start to rise by 5% or more each year, with no end in sight. And that may be optimistic. So far this year, Mr Rockowitz says, Li & Fung’s sourcing operation has seen price increases of 15% on average. Other sourcers of Asian toys, clothes and basic household products tell similarly ominous tales.

However, the Economist points out that Rockowitz may have it wrong.  If the Chinese can “design labor out” of manufacturing processes, they may be able to stay a low cost location for another generation or so.  You can read the full story here.

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