End of Chimerica? China minimum wage to double by 2015

The tectonic plates of the global economy are shifting as China attempts to bolster domestic demand through wage increases.  Bloomberg cites a report in the South Morning China Post,

China plans to increase its minimum wage by at least 20 percent annually in the next five years, more than doubling it by 2015, to increase spending power and consumption, the South China Morning Post said, citing Huang Mengfu, a government adviser.

A risky gambit given that manufacturers will move offshore.  Bloomberg also reports China has lost the Calvin Klein bra maker,

China’s rising labor costs prompted Top Form International Ltd., a bra maker for Calvin Klein, to pick Southeast Asia for a new factory, adding to signs of a reshaping of the economy away from export-tied regions.

“We’ve halted plans to open a fourth factory in China,” Eddie Wong, group managing director and co-founder of Hong Kong- based Top Form, which also supplies brands including Maidenform, said in an interview yesterday. “We can consider other cities in China but it’s only a matter of time before wages will rise again and it will get more expensive for us.”

The country may believe that its domestic market has hit critical mass and the manufacturers who leave will be replaced by those seeking to sell into China.     Nevertheless,  we will be watching prices at WalMart and Costco very closely.   The sun is setting on Chimerica.

Though not updated to reflect today’s change,  here is a great graphic of the minimum wage throughout China’s provinces.

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5 Responses to End of Chimerica? China minimum wage to double by 2015

  1. David Jones says:

    “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” Adam Smith

    “In 2005, 21.2 percent of US national income accrujed to just 1 percent of earners. Contrast 1968, when the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker. Today the CEO of Wal-Mart earns nine hundred times the wages of his average employee. Indeed, the wealth of the Wal-Mart founders’ family that year was estimated at about the same ($90 billion) as that of the bottom 40 percent of the US population: 120 million people.”

    Political extremism generally follows extreme economic inequality. Stay tuned.

  2. David Jones says:

    Last quote was from Tony Judt’s new book Ill Fares the Land

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