China’s growing pains

Things are becoming a little bit of a problem here in China. First, the inflation rate has jumped to nearly 7%, unheard of here, and it will have a growing effect on the general workforce. For example, food prices from one year ago have risen 18%. The US-China trade deficit has been reduced, but China’s overall trade deficit has risen, caused by more exports to the EU and Africa. Government controls are not adequate, so there is pressure to make more changes in the laws. Of course the revaluation of the RMB could be a consideration (now hitting nearly 7.3 to the US Dollar), though the government is still reluctant to expand the band. Expectations of 7 or less is possible, but then there is the Olympics here, and that would raise the visitors’ costs. Consumer spending in China is not expanding at a rate to help with the production capacity.

Sourcing professionals should watch the effects on pricing and demand. Recently, I noted that there will be more outsourcing by AirBus here in China, which will increase the demand on steel and other commodities as AirBus attempts to repair their shipping schedules to their customers.

It would help a China Sourcing commodity manager to use the RSS feed process to some personal website setup easily on Yahoo or MSN in order to monitor current happenings here concerning government policy and economic data.