Rising labor costs in China will have limited impact on U.S. inflation

Rising labor costs in China will have limited impact on U.S. inflation Xinhuanet Since the beginning of this year, the inflation level in the United States has been rising month by month, with the inflation rate in May reaching 3.57%. This is...

Some economists in the United States believe that the rising prices of "Made in China" goods that many Americans rely on for survival have helped push up U.S. inflation, and this is due to the rise in China's labor costs and the external transmission of China's domestic inflation.

In May this year, China's consumer price index (CPI) rose 5.5% year-on-year, hitting a 34-month high. The inflation situation remains severe.

Cao Honghui, director of the Financial Markets Office of the Institute of Finance, Chinese Academy of Social Sciences, said that China's labor costs are indeed rising, but its impact on U.S. inflation is weak, and it is difficult to even form a significant positive correlation.

Although China's labor wage levels have been increasing, it is not a "skyrocketing". The increase in recent years has remained around 10%. Due to the low base, compared with other emerging market countries, the post-increase wages are still low.

The rise in labor prices is caused by China's economic development, demographic transformation and income distribution reform policies. The proportion of China's labor costs in commodity prices is relatively low, especially in the field of processing trade, less than 10%. Even if there is a certain increase, the impact on the final price of the product will be very limited. Product prices are determined by both supply and demand and need to be tested to see if they can be accepted by the market. They are not simply determined by rising labor prices.

Due to the significant competition between emerging market economies, low-end consumer goods are relatively easy to form substitution relationships, and it is difficult for the prices of goods exported from China to the United States to rise significantly.