China Labor Strikes

Factory workers in China have recently been striking for better pay. The biggest question is, "will these strikes have influences on prices in the United States?" The answer is YES! " Domestically,... it marks a long overdue shift in economic policy and means that China is now entering the middle stages of economic development."

"For years, China’s modus operandi was keep labor costs and comparative wages exceptionally low, so as to make it lucrative and attractive for foreign companies, and their foreign direct investment, to enter the mainland and set up shop. This was also contingent upon keeping the renminbi artificially deflated in value, so European and US purchasing power could by more Chinese goods. However, anyone with a background in economics will tell you that comparative advantage, i.e. the cheapness of creating/producing goods from one country to another, changes over time as costs of living, labor, capital and investment rise with quality of living. Odds are much of the cheap, low-end production goods that China has dominated over the last decade (textiles, plastics, toys), will move to a country like Vietnam, where labor costs are still exceptionally low. That being said, the rise in labor wages (which is expected to nearly double from 1,000 to 2,000 renminbi) following these strikes, is very telling about where China is economically–and more importantly–developmentally"

Another important topic to discuss that is related to these strikes is how the production along coastal areas is reaching a so called "middle-end-production" stage. This meaning that a lot of work could be shifted inland where "low-end-production" still exists. It was quite noticeable that the coastal areas of China have been booming and inland China is still struggling, so these current labor conflicts in coastal areas may actually end up helping inland China. Some suggest that we will begin to see development moving west to east, instead of the tradition north-south along the coast.