China Just Issued A Warning To Anyone Worried About Inflation

China computer

Photo: AP

China’s government has announced that it will boost the country’s minimum wage by an average annual rate of 13% over the next 5 years, according to China Daily.According to the Ministry of Human Resources and Social Security, minimum wages in most parts of the country will reach more than 40 per cent of the average income of local urban residents by 2015.

In other words, China is at least trying to show that its working on filling the gap between rich and poor- or as Premier Wen Jibao once said, creating “harmonious employment relations.”

Not only that, but this speaks to China bears who think the country’s economy will hit a wall because of its dependence on investors over consumers. This move will give the masses more purchasing power and boost domestic demand. Its good to remember, though, that the highest minimum wage in China (Senzen province, specifically) is only $203 a month.

For the rest of the world, this might be a little unpleasant. If the cost of Chinese labour goes up, the cost of Chinese goods will go up. That means cost push inflation, or rising prices, for us.

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