China Inflation Watch Continues...

Article in Bloomberg Business Week regarding wage inflation in China. Why is this relevant to office interiors?? Because as wages in China go up, the cost spread between China products and US products goes down, and the value of importing products from China diminshes.

This is not going to happen overnight, but it will certainly have an impact (increased prices) over the next 36 months.

Keep a Watch on China...

Headlines from China this evening (courtesy of Bloomberg.com):

• Retail sales grew 18.5% in April
• Property prices jumped 12.8%
• The Central Bank announced new lending of $113 Billion - exceeding all expectations

Can we all agree that we have seen this movie before, and it doesn't have a happy ending. Overheated economy grows and grows - until it stops growing - and the house of cards tumbles.

Why what happens in China is relevant to an East Bay Office Furniture dealer (amongst others):

1. Imports: A large percentage of our day-to-day furniture, and a healthy percentage of components used by our high-end furniture manufacturers, are imported or directly sourced from China. Low costs have allowed us to remain highly competitive in a brutal market. A disruption to the supply chain would be very ugly (and my industry is just one of many in the same boat).
2. Exports: Products manufactured in California, and leaving via the Port of Oakland for China and the Far East are currently helping to lead the East Bay (and California) out of the recession.
3. U.S. Economy: Mainland China is the largest holder of U.S. debt. The old saying goes if China sneezes, the U.S. may catch pneumonia.

I'm not a gloom and doom guy, but if China goes through anything similar to what the U.S. has endured over the past two years, things could get very interesting very quickly.