In China bahnt sich was hübsches an:
Inflation looks to be next export from China
Keith Bradsher and Chris Buckley/NYT
Friday, April 16, 2004
Economy's growth lifts prices for goods from rice to steel
GUANGZHOU, China After nearly a decade of mostly flat to falling prices in China that have helped hold down costs around the world, the country has suddenly turned into an exporter of inflation, with growing signs of a spiral of wages and prices similar to what the United States suffered in the 1970s. As managers from Chinese businesses of all sizes staffed exhibition booths here Thursday for the opening day of China’s biggest trade fair, the common refrain was that prices of everything from rice to steel were rising sharply, and that prices for exports to the United States, Europe and other markets would have to follow. A socket wrench manufacturer had raised prices by 10 percent for high-quality models and by up to 50 percent for poor-quality models, for which the main cost is increasingly expensive steel. An exporter of exhaust manifolds, brake drums and suspension parts to American repair garages had raised prices by 10 percent in several increments since December. A few manufacturers had not raised prices yet, but said they were considering doing so, like one of the many makers of sinks and toilets who said he had just given his workers a raise to help them with rising expenses.
.
‘‘The cost of living — transport, food, everything — is going up,’’ said Su Han Xiang, the director general of Jinshan Ceramic Industries. Beijing announced Thursday that the economy had grown 9.7 percent in the first quarter, faster than expected, and said that raw material prices and other costs for businesses were rising and were increasingly likely to spill into inflation in consumer prices. ‘‘There is a time lag, but it can’t be too long, and there is pressure for price rises,’’ said Zheng Jingping, the spokesman of China’s National Bureau of Statistics, at a news conference in Beijing on Thursday. ‘‘If this goes on for a long time it will cause problems.’’ Using two terms that the Chinese government has conspicuously avoided until now, the state-run Xinhua news agency on Thursday quoted Morgan Stanley’s China economist, Andy Xie, describing the Chinese economy as ‘‘a bubble’’ and an International Monetary Fund economist, Raghuram Rajan, warning that the Chinese economy showed ‘‘some signs of overheating.’’ Xie said by telephone that while the National Bureau of Statistics reported Thursday that consumer prices were exactly 3 percent higher in March than a year earlier, the true increase could be 7 percent or 8 percent. ‘‘The State Council has said they want to keep inflation below 3 percent, so they have to report an increase of 3 percent,’’ he said, referring to China’s cabinet.
.
To be sure, ferocious competition has kept prices from rising in China for some big-ticket items that a growing proportion of China’s population is buying, like cars, household appliances and mobile phones. By next year, many new steel mills now under construction could start alleviating the acute shortages that are driving up steel prices. But growing evidence suggests that while China has publicly embraced the market, it has been using extensive but informal price controls on state-owned enterprises to control inflation until now.
.
Two representatives of one of China’s largest state-owned chemical companies said that while the company had just raised by 50 percent the export price of a popular insecticide for rice and cotton, the government had prevented the company from charging more to Chinese farmers.
.
Yet the increase in the export price is an accurate reflection, they said, of rising costs. Yellow phosphor, the key ingredient in the insecticide, is in short supply like many raw materials. And while chemical factories commonly ran seven days a week until a few months ago, many are now idle for two or three days a week because of blackouts, so that the steep investment cost for each production line can only be spread over a smaller output of chemicals. The United States and Western European nations found in the 1970s that price controls can limit inflation for a while, but cause markets to become less efficient and slow economic growth, while prices jump even faster when the controls are lifted. China has a different eco nomic model, in which companies with disappearing profit margins or even losses are allowed to continue borrowing large sums from the state-owned banks. Credit-rating agencies estimate that the banks are not receiving payments on nearly half their loans. This proportion has fallen somewhat in recent months, however, as the banks have sharply increased their loans and the borrowers have not yet had time to de fault on the new loans. As market-based approaches to the problem prove ineffective, Beijing is beginning to turn to older, more direct measures. The Xinhua news agency reported Thursday that local governments had stopped approving new economic development zones, which offer low taxes and other preferences, and had even canceled many previously approved zones. ‘‘Since last year, rectifying the land market by using the ‘iron hand’ has become an important measure in our country’s macro-economic controls,’’ the agency said. While it may seem in Wal-Mart stores as though a big part of the American family’s purchases are made in China, exports from China to the United States last year were only equal in value to 1.2 percent of the goods and services produced within the United States.
.
Huge companies like Wal-Mart also have a considerable ability to force sellers to hold down price increases; the main buyers at the Guangzhou Trade Fair are wholesalers who supply small and medium-sized retailers. Yet China has had an outsized effect in stabilizing global prices until very recently because its very low labor cost has allowed it be the country to beat on prices in many industries.
.
As Chinese prices rise, many other low-income and middle-income countries exporting to the United States — including Mexico and countries in Eastern Europe and Central and South America — are likely to find it easier to raise prices as well. The New York Times Chris Buckley reported from Beijing.
.
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Economy's growth lifts prices for goods from rice to steel
GUANGZHOU, China After nearly a decade of mostly flat to falling prices in China that have helped hold down costs around the world, the country has suddenly turned into an exporter of inflation, with growing signs of a spiral of wages and prices similar to what the United States suffered in the 1970s. As managers from Chinese businesses of all sizes staffed exhibition booths here Thursday for the opening day of China’s biggest trade fair, the common refrain was that prices of everything from rice to steel were rising sharply, and that prices for exports to the United States, Europe and other markets would have to follow. A socket wrench manufacturer had raised prices by 10 percent for high-quality models and by up to 50 percent for poor-quality models, for which the main cost is increasingly expensive steel. An exporter of exhaust manifolds, brake drums and suspension parts to American repair garages had raised prices by 10 percent in several increments since December. A few manufacturers had not raised prices yet, but said they were considering doing so, like one of the many makers of sinks and toilets who said he had just given his workers a raise to help them with rising expenses.
.
‘‘The cost of living — transport, food, everything — is going up,’’ said Su Han Xiang, the director general of Jinshan Ceramic Industries. Beijing announced Thursday that the economy had grown 9.7 percent in the first quarter, faster than expected, and said that raw material prices and other costs for businesses were rising and were increasingly likely to spill into inflation in consumer prices. ‘‘There is a time lag, but it can’t be too long, and there is pressure for price rises,’’ said Zheng Jingping, the spokesman of China’s National Bureau of Statistics, at a news conference in Beijing on Thursday. ‘‘If this goes on for a long time it will cause problems.’’ Using two terms that the Chinese government has conspicuously avoided until now, the state-run Xinhua news agency on Thursday quoted Morgan Stanley’s China economist, Andy Xie, describing the Chinese economy as ‘‘a bubble’’ and an International Monetary Fund economist, Raghuram Rajan, warning that the Chinese economy showed ‘‘some signs of overheating.’’ Xie said by telephone that while the National Bureau of Statistics reported Thursday that consumer prices were exactly 3 percent higher in March than a year earlier, the true increase could be 7 percent or 8 percent. ‘‘The State Council has said they want to keep inflation below 3 percent, so they have to report an increase of 3 percent,’’ he said, referring to China’s cabinet.
.
To be sure, ferocious competition has kept prices from rising in China for some big-ticket items that a growing proportion of China’s population is buying, like cars, household appliances and mobile phones. By next year, many new steel mills now under construction could start alleviating the acute shortages that are driving up steel prices. But growing evidence suggests that while China has publicly embraced the market, it has been using extensive but informal price controls on state-owned enterprises to control inflation until now.
.
Two representatives of one of China’s largest state-owned chemical companies said that while the company had just raised by 50 percent the export price of a popular insecticide for rice and cotton, the government had prevented the company from charging more to Chinese farmers.
.
Yet the increase in the export price is an accurate reflection, they said, of rising costs. Yellow phosphor, the key ingredient in the insecticide, is in short supply like many raw materials. And while chemical factories commonly ran seven days a week until a few months ago, many are now idle for two or three days a week because of blackouts, so that the steep investment cost for each production line can only be spread over a smaller output of chemicals. The United States and Western European nations found in the 1970s that price controls can limit inflation for a while, but cause markets to become less efficient and slow economic growth, while prices jump even faster when the controls are lifted. China has a different eco nomic model, in which companies with disappearing profit margins or even losses are allowed to continue borrowing large sums from the state-owned banks. Credit-rating agencies estimate that the banks are not receiving payments on nearly half their loans. This proportion has fallen somewhat in recent months, however, as the banks have sharply increased their loans and the borrowers have not yet had time to de fault on the new loans. As market-based approaches to the problem prove ineffective, Beijing is beginning to turn to older, more direct measures. The Xinhua news agency reported Thursday that local governments had stopped approving new economic development zones, which offer low taxes and other preferences, and had even canceled many previously approved zones. ‘‘Since last year, rectifying the land market by using the ‘iron hand’ has become an important measure in our country’s macro-economic controls,’’ the agency said. While it may seem in Wal-Mart stores as though a big part of the American family’s purchases are made in China, exports from China to the United States last year were only equal in value to 1.2 percent of the goods and services produced within the United States.
.
Huge companies like Wal-Mart also have a considerable ability to force sellers to hold down price increases; the main buyers at the Guangzhou Trade Fair are wholesalers who supply small and medium-sized retailers. Yet China has had an outsized effect in stabilizing global prices until very recently because its very low labor cost has allowed it be the country to beat on prices in many industries.
.
As Chinese prices rise, many other low-income and middle-income countries exporting to the United States — including Mexico and countries in Eastern Europe and Central and South America — are likely to find it easier to raise prices as well. The New York Times Chris Buckley reported from Beijing.
.
See more of the world that matters - click here for home delivery of the International Herald Tribune.
Economy's growth lifts prices for goods from rice to steel
GUANGZHOU, China After nearly a decade of mostly flat to falling prices in China that have helped hold down costs around the world, the country has suddenly turned into an exporter of inflation, with growing signs of a spiral of wages and prices similar to what the United States suffered in the 1970s. As managers from Chinese businesses of all sizes staffed exhibition booths here Thursday for the opening day of China’s biggest trade fair, the common refrain was that prices of everything from rice to steel were rising sharply, and that prices for exports to the United States, Europe and other markets would have to follow. A socket wrench manufacturer had raised prices by 10 percent for high-quality models and by up to 50 percent for poor-quality models, for which the main cost is increasingly expensive steel. An exporter of exhaust manifolds, brake drums and suspension parts to American repair garages had raised prices by 10 percent in several increments since December. A few manufacturers had not raised prices yet, but said they were considering doing so, like one of the many makers of sinks and toilets who said he had just given his workers a raise to help them with rising expenses.
.
‘‘The cost of living — transport, food, everything — is going up,’’ said Su Han Xiang, the director general of Jinshan Ceramic Industries. Beijing announced Thursday that the economy had grown 9.7 percent in the first quarter, faster than expected, and said that raw material prices and other costs for businesses were rising and were increasingly likely to spill into inflation in consumer prices. ‘‘There is a time lag, but it can’t be too long, and there is pressure for price rises,’’ said Zheng Jingping, the spokesman of China’s National Bureau of Statistics, at a news conference in Beijing on Thursday. ‘‘If this goes on for a long time it will cause problems.’’ Using two terms that the Chinese government has conspicuously avoided until now, the state-run Xinhua news agency on Thursday quoted Morgan Stanley’s China economist, Andy Xie, describing the Chinese economy as ‘‘a bubble’’ and an International Monetary Fund economist, Raghuram Rajan, warning that the Chinese economy showed ‘‘some signs of overheating.’’ Xie said by telephone that while the National Bureau of Statistics reported Thursday that consumer prices were exactly 3 percent higher in March than a year earlier, the true increase could be 7 percent or 8 percent. ‘‘The State Council has said they want to keep inflation below 3 percent, so they have to report an increase of 3 percent,’’ he said, referring to China’s cabinet.
.
To be sure, ferocious competition has kept prices from rising in China for some big-ticket items that a growing proportion of China’s population is buying, like cars, household appliances and mobile phones. By next year, many new steel mills now under construction could start alleviating the acute shortages that are driving up steel prices. But growing evidence suggests that while China has publicly embraced the market, it has been using extensive but informal price controls on state-owned enterprises to control inflation until now.
.
Two representatives of one of China’s largest state-owned chemical companies said that while the company had just raised by 50 percent the export price of a popular insecticide for rice and cotton, the government had prevented the company from charging more to Chinese farmers.
.
Yet the increase in the export price is an accurate reflection, they said, of rising costs. Yellow phosphor, the key ingredient in the insecticide, is in short supply like many raw materials. And while chemical factories commonly ran seven days a week until a few months ago, many are now idle for two or three days a week because of blackouts, so that the steep investment cost for each production line can only be spread over a smaller output of chemicals. The United States and Western European nations found in the 1970s that price controls can limit inflation for a while, but cause markets to become less efficient and slow economic growth, while prices jump even faster when the controls are lifted. China has a different eco nomic model, in which companies with disappearing profit margins or even losses are allowed to continue borrowing large sums from the state-owned banks. Credit-rating agencies estimate that the banks are not receiving payments on nearly half their loans. This proportion has fallen somewhat in recent months, however, as the banks have sharply increased their loans and the borrowers have not yet had time to de fault on the new loans. As market-based approaches to the problem prove ineffective, Beijing is beginning to turn to older, more direct measures. The Xinhua news agency reported Thursday that local governments had stopped approving new economic development zones, which offer low taxes and other preferences, and had even canceled many previously approved zones. ‘‘Since last year, rectifying the land market by using the ‘iron hand’ has become an important measure in our country’s macro-economic controls,’’ the agency said. While it may seem in Wal-Mart stores as though a big part of the American family’s purchases are made in China, exports from China to the United States last year were only equal in value to 1.2 percent of the goods and services produced within the United States.
.
Huge companies like Wal-Mart also have a considerable ability to force sellers to hold down price increases; the main buyers at the Guangzhou Trade Fair are wholesalers who supply small and medium-sized retailers. Yet China has had an outsized effect in stabilizing global prices until very recently because its very low labor cost has allowed it be the country to beat on prices in many industries.
.
As Chinese prices rise, many other low-income and middle-income countries exporting to the United States — including Mexico and countries in Eastern Europe and Central and South America — are likely to find it easier to raise prices as well. The New York Times Chris Buckley reported from Beijing.
.
