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Tuesday, March 21, 2006

Imports From China Aren't Pricier -- Yet


If the wages of U.S. workers were rising at 10% per year, you can be sure economists would be sounding the inflation alarm bells. After all, even the slightest sign of an upward surge in labor costs brings calls for the Federal Reserve to boost interest rates even faster.

But what if it's Chinese wages that are rising at a 10% pace? Should the Fed care? In the era of globalization it sometimes feels as if Guangdong and China's other industrialized provinces are extensions of the U.S economy. Indeed, the value of cheap imports from China -- about $240 billion in 2005 -- exceeds the net revenues of the U.S. securities industry. With that large an impact, it wouldn't be a surprise if soaring wages in China translated to higher import prices and faster inflation in the U.S.

But here's the surprise: For now the cost increases in China are not being passed through to U.S. prices. The latest data from the Bureau of Labor Statistics, released on Mar. 15, show that the price of imports from China has fallen by 0.4% over the past year, vs. a 1.8% rise in the price of non-oil imports from all countries. In part, rapid productivity jumps in Chinese manufacturing may be allowing employers to pay higher wages and still keep prices low.

Posted by Trade Monkey :: 9:52 AM :: 0 comments Perma-Link

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