Monday, October 11, 2010

China will increase minimum wages

I just read an article in the Taipei Times that says China is planning to raise their minimum wage substantially. The analyst said this was as good as a revaluation of the Yuan.

I just googled around and it seems this has already been happening. (Its also interesting that China allows cities and regions to set their own minimum wages.)

Does this mean they are going to raise the minimums again? I know Vietnam did that for a while, which angered people who invested based on certain labor cost assumptions.

My big question is if raising minimum wages is really as good as revaluing the Yuan.

If it is, then I can see China doing this instead of revaluing. You get the same effect (supposedly) but your US treasuries still come due at the original amount in Yuan terms, and your working populace feels richer, too.

Of course, its comical that the same article says that revaluing the Yuan by 20-40% would destroy the export industries...but raising labor costs by 20-30% is fine?

May have to start closing down my RMB accounts if this is the new plan in China. If they export less due to higher wages, the Yuan might depreciate even. Still, I have to wonder if this is really the same as a revaluation.

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