During the 19th century, the West began a brisk trade relationship with the Chinese though Canton. It has been a good deal for both sides, with a few exceptions like the First Anglo-Chinese War, ever since.
China has now developed a problem which undermines the foundation of what has been its attraction as an exporter for countless decades. Inflation in the country is increasing the costs of its goods. According to The Wall Street Journal, the heart of the problem is that "manufacturers say their profits have dwindled as they pay out more for raw materials and energy." With oil at $140 and inflation in China running at 11%, the situation is likely to get worse.
China’s new inflation problem is a bigger problem for the West. Price increases on a huge number of products have been kept in check because they are made cheaply on the mainland and bought for retail sale everywhere from the US to Germany. A run-up of prices in goods out of China means a run-up in the prices for all of these items in the countries which import them.
A number of economists and retail executives have put forward the thesis that Vietnam and other poor Asia countries can replace China as a source for imports. The trouble is that Vietnam does not have 1.3 billion people and the infrastructure to be a major manufacturing.
China’s inflation is spreading to the West and little can be done about it.
Douglas A. McIntyre
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