China Wage Hikes Boost Costs but Might Help Sales

From AP:

The cost of hiring Chinese workers who supply the world with inexpensive furniture and toys is climbing. But workers with more money to spend is good news for foreign companies that see them as customers, not just factory labor.

Areas throughout China have raised local minimum wages and some foreign employers have given out hefty pay hikes. That, combined with an expected rise in China’s currency against the dollar this year, will squeeze exporters of clothing and other low-margin goods, possibly forcing thousands to close or move to cheaper countries such as Vietnam.

“It is very difficult for us,” said Danny Lau, chairman of the Hong Kong Small and Medium Enterprises Association. He said some 2,000 to 3,000 of an estimated 50,000 Hong Kong-owned factories in southern China’s Pearl River Delta, an export hub, might close this year.

But putting more money in workers’ pockets will help turn them into consumers and accelerate China’s growth as a major market for imports from Boeing jetliners to Brazilian soybeans.

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