Chinese inflation hits 11-year high

News

Helen Jacobs Feb 22 2008, 8:00am

Pro audio equipment manufacture may be hit

China could start exporting inflation, after consumer prices hit an 11-year high last month, signalling an end to the days of ultra-cheap Chinese goods.

Rising costs of fuel, food and raw materials are forcing some Chinese manufacturers to raise prices for their goods.

"We are taking for granted that China will provide cheap products forever. But I think we are probably about to see the end of an era," said Dong Tao, an economist with Credit Suisse in Hong Kong. "China is exporting inflation in a big way. The rest of the world will feel that."

The Chinese currency continues to appreciate, with Morgan Stanley predicting it could increase by as much as ten per cent this year. Labour costs continue to increase as well.

Stanley Lau, deputy chairman of the Federation of Hong Kong Industries said: "There are about 70,000 factories in the Pearl River Delta today. Many of them are talking about reducing their workforce or even shutting down. We expect more than ten per cent of these factories will be closed in a year or two."