Wednesday, March 22, 2006

The News of Our Death Has Been Greatly Exaggerated

If you remember back in the 80's the story was how the rise of Japan would mean the demise of the US as a world economic power. Then they had a real estate crash, a stock market crash, a banking crisis, and a decade long recession. Now supposedly China plays the role of the great foreign threat. From that weird pink newspaper, the Financial Times:

The competitiveness of China’s manufacturing industries has suffered serious erosion over the past year, according to one of the world’s largest trade sourcing companies.

Hong Kong-based Li & Fung group, which manages a $7.1bn a year trading business, said price rises crept back into the Sino-US and EU supply chains last year, after at least six years of often “severe deflation”.

William Fung, Li & Fung managing director, reported an average 2-3 per cent increase in the once unbeatable China price its US and European clients were willing to pay. He pointed to a “double-digit” rise in Chinese labour costs, the revaluation of the renminbi and higher oil and energy costs for the shift.