Chinese production costs going up...

[badcar]

Thought this was interesting. I was used to negotiating prices for a 90 day freeze, in some cases longer. I now am dealing with day to day price increases from the factories I deal with over there. Christmas is looking 10% more expensive than last year....

Chinese Production Prices Rise 6.1% in January
SportsOneSource Media Posted: 2/18/2008
The Chinese government reported that the Producers’ Price Index (PPI) for manufactured goods rose by 6.1% in January over the same month last year. Purchasing prices for raw material, fuels and power rose by 8.9%, according to the National Bureau of Statistics of China.

Pressure was highest in the earliest stages of production thanks to rising commodity and energy prices. The PPI for means of production increased 6.5 percent over last January, the government reported. That included an increase of 8.5% in the raw materials industry and 3.8% in the manufacturing industry.

Within the consumer goods sector, the index rose 4.6%, including 10.4% for foodstuffs, 2.2% for clothing and 3.0% for commodities. The PPI for durable consumer goods dropped 0.6 percent.
In terms of different categories:

PPI for crude oil increased 29.9 percent year-on-year. The prices for oil products, such as gasoline, diesel and kerosene increased 7.3, 10.0 and 10.9 percent respectively. The PPI for crude coal, meanehile, increased 14.9 percent.

PPI for polystyrene dropped 4.9 percent compared with the same month a year ago. While the prices producers pay for latex surged 20.7, prices for terylene declined 0.2 percent, year on year.

PPI for smelting and pressing of ferrous metals grew 17.3 percent from the same month last year. PPIs for ordinary large rolled-steels, medium rolled-steels, small rolled-steels, wire rod and heavy steel plate correspondingly increased 17.3, 28.6, 26.7, 25.0 and 16.6 percent respectively.

PPI for smelting and pressing of nonferrous metals gained a year-on-year rise of 4.7 percent. Of the total, PPIs for copper and lead up 2.0 and 27.9 percent, while that for aluminum and zinc down by 2.9 and 26.1 percent respectively year-on-year.

The government is scheduled to release January's Consumer Price Index Feb. 19.

[Shaun @ Tru6]

quotas for apparel are sunsetting this year as well. should make for an interesting year and 09. I've heard from reliable sources that water is one of China's and India's chief issues in the future.

[WI wide body]

Maybe the true solution is that when those Chinese imports each month reach the dollar value that China allows into their country we send their products right back to Bejing.

Then watch how quickly their currency gets realistically valued and their safety and wage scales get adjusted.

[Aurel]

Heh, pretty soon the dollar will be so low that it will make sense for the chinese to export their manufacturing to the USA .

Aurel

[WI wide body]

What is never factored in with all that neat cheap stuff from China is the American jobs it has cost. But when it finally comes home to roost it most likely will affect our standard of living in manner that will forever change the American way of life.

[Aurel]

Originally Posted by Wayne at Pelican Parts

Trouble is, I'm not sure if all the jobs we have now are just made for servicing the wealth that we have created over the past 50 years. I'm not sure how much stuff we actually create or innovate these days...

-Wayne

You mean, like companies dedicated to the maintenance of 30 year old Porsches? Yeah, I hear ya

Aurel

[Porsche-O-Phile]

Originally Posted by Aurel

Heh, pretty soon the dollar will be so low that it will make sense for the chinese to export their manufacturing to the USA .

Aurel

I know you're saying that tongue-in-cheek but I have to point out that one of the reasons I have a hard time believing in conventional upsides to weak dollar economics (cheaper manufacturing and consequently better for foreign invesment in the U.S.) is that the Chinese deliberately peg their currency to ours.

Conventional economics would say that a weak dollar has the consequence of making American goods cheaper overseas and creating more manufacturing and jobs here, so it's not all bad. It's actually good in a trade imbalance situation.

Unfortunately I suspect much of the conventional wisdom no longer applies because of China and their deliberate and calculated efforts to destroy American manufacturing. By pegging the Yuan to the dollar, they effectively give any foreign consumer of manufactured goods a far more lucrative option for purchases and a reason to sidestep the U.S. and bring their business straight to China. It's simple undercutting - and the brilliant (or diabolical, depending on your point of view) part is that they do it using manufacturing capacity stolen right from under our own noses, by using our own insatiable lust for manufactured consumer commodities against us.

The Chinese attack is threefold:

1. Eliminate American manufacturing and bring it to China by providing cheaply made goods. Once gone, those jobs are never to return.

2. Ensure that the rate of transfer of manufacturing from the U.S. to China is neither slowed nor stemmed due to "weak dollar policy" economics (this would be the traditional way to fight a growing trade imbalance) by pegging the Yuan to the Dollar.

3. Extend American consumers credit to buy goods manufactured in China (the same manufacturing that was so deftly stolen from the U.S. in the first place).

Brilliant really.

But ABSOLUTELY a direct and specific form of economic attack against the United States and nobody else.

If you're some European manufacturing company wanting to "outsource" components for your products, are you going to go to the U.S., where 100 Euros might get you 10 widgets on exchange rate with a "weak" dollar, or to China, where you get 500 of them?

I rest my case.

We're screwed.