Think about it.. China has been on a "mission" to modernize for a while now. They have bulldozed thousands-of-years-old communities, to create "instant modernity".. Millions of Chinese (mostly young men) have been on the move to the big cities, in search of jobs. Once in the city, they often find themselves cut off from family, with a crappy job that barely supports them. They DO see how the rich folks are living well though, and all this breeds discontent.
They are still a dictatorship, but there is a tipping point when prices rise and rise and standards of living don't....when expected services are out of reach for the majority..and when people rise up.
All the western businesses that relocated there, did so because they had a willing/plentiful supply of slave labor and compliant leadership that welcomed them with open arms.
If prices continue rise, watch for civil unrest to break out. Will foreign corporatists still feel "comfortable" operating there then?
The same thing applies to India. India & Pakistan still hate each other, and Pakistan still has a rather sketchy leadership set up. It would not take much for both places to "boil over".
Stability is a major component when corporatists set up shop abroad.
There's a LOT of willing-to-work Haitians, but do we see GM setting up shop there?
Unrest in China & India could bring home jobs, but at what cost? Would these countries, now used to having jobs brought to them on silver platters, take the loss of them laying down?
Why Inflation in China Could Get Out of Control
http://www.minyanville.com/businessmarkets/articles/china-inflation-in-china-china-inflation/12/13/2010/id/31649By James Kostohryz Dec 13, 2010 9:30 am
Price controls, subsidies will serve as temporary palliatives at best; the only way to control inflation in China is through methods that substantially slow the economic growth rate. For many years, inflation rates in China have remained remarkably low despite spectacular rates of economic growth. That situation is changing and tradeoffs will increasingly emerge.
The Price-Wage Spiral Heats Up
In China consumer prices jumped by 5.1% year over year (YoY) in November while wholesale costs rose by 6.1%. It must be kept in mind that it is likely that official statistics are significantly understating actual inflation in China.
The leading culprit of consumer price inflation were food costs, which officially rose by 11.7% in November compared to a year ago. Vegetable prices are up by over 60%. Hoarding and speculative activity have caused the prices of some food commodities to rise by over 100%. For example, garlic prices have risen by over 1,000% in the past two years. Anecdotal reports suggest that overall food prices may have risen more than official statistics reveal. Keep in mind that dramatic price increases are occurring despite the implementation of extensive price controls and other measures by the Chinese government.
Rising food costs are not the only thing that Chinese policy makers need to worry about. The Chinese economy is showing classic signs of entering into a wage-price spiral. Wages at Foxconn, China’s most important tech factory complex, are up over 100% in less than a year. Wages in most eastern factories in China have risen by well over 20% in the past year. Labor shortages, something almost unthinkable several years ago, are becoming a common problem in certain key industries.
Wages are rising faster that productivity in China, and this means that inflation will almost certainly be the result. At the same time, the increase in the cost of living in China will put further upward pressure on wage demands, resulting in an inflationary wage-price spiral. That spiral seems to have already taken off.
What can the Chinese government do to stop it?
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