Thursday, January 20, 2011

China to raise prices on U.S. consumers by 30%

China devalues U.S. buying power by 30%, but preserves the present value of Chinese-held Treasury Bonds.

This means that by summertime, and certainly by next holiday season, Chinese goods will be 30% more expensive, for the same low-quality merchandise. This may cause some buyers, like Walmart, to look at manufacturing in other countries. And may cause American merchandise to sell better in comparison, thereby decreasing the trade deficit.

The reason for this is an increase in the commodities market, which caused an increase in food prices in China. The government had to cap increases in food prices for the people, and decided instead to pass along the price increases foreign buyers.

Keep in mind that the picture above is deceiving.  While China's economy grew many times faster than the U.S. economy did recently, the Chinese GDP is still 1/3 the U.S. GDP. Many many Chinese continue to live in poverty even though they work.

6 comments:

Woodsterman (Odie) said...

Also, part of it could be the devalued dollar. Our relationship is a double edged sword. Yes they they hold 11% of our debt, but at the same time, we are their best customer. If we stopped buying, their economy would collapse.

Nickie Goomba said...

I plan to boycott Kung Pao Chicken when that happens.

amanofwonder said...

Confucius says,

Chinese language has no symbol for cooperation, but a trillion reasons why we can strong arm the US.

Just a conservative girl said...

We have much more power with them then many think. We stop buying from them they are in big trouble.

LL said...

American wages drop - Chinese wages increase as we homogenize the world. That is the promise of the ObamaNation.

Mustang said...

This may cause some buyers, like Walmart, to look at manufacturing in other countries. And may cause American merchandise to sell better in comparison, thereby decreasing the trade deficit.

I’m not sure, Opie ... linked in an earlier post (here) you will find an index to the things Americans make and it isn’t very impressive. I think Wal-Mart is so deeply embedded with China, they’ll never part company. More than this, our government recently offered Maytag a fantastic subsidy to move its plant to Mexico. Personally, I can’t imagine why our government would do that—unless it is part of Obama’s fundamental changes to our way of life. Meanwhile, an entire town was shut down in Iowa, and the Democrats still worship Obama as the Messiah. There is only one word for this: disgusting.