Many developed countries are calling for a stronger China Yuan.
They want the Chinese government to let the China Yuan. They want China Yuan to appreciate in value.
However, is there a need for a stronger China Yuan?
Foxconn had announced a 66% salary increment for the unhappy workers. Chinese workers are going on strike to fight for better salary. A mere increment of 15% is not enough to make them happy.
If the average salary increment for Chinese workers is 20%, the higher labor cost will reflect in the price of finished goods.
The consumers in other countries will have to pay more forimported Made in China goods. We do not even need a stronger China Yuan to feel the pitch of more expensive imported goods.
If the Chinese government allows the China Yuan to appreciate 10% against major currencies of the world, the consumers in other countries will have to pay even higher price for imported Chinese goods.
That is certainly unwelcome to the consumers.
In the short run, the companies will not close the plants in China. They cannot simply close the plants and move the jobs back to home countries.
The people in their home countries may not have the skill to take up labor intensive jobs anymore.
Most consumers do not know
Even if the shoes manufacturers and garment manufacturers want to move their factories back, they will have problem finding workers.
Is there a need for a stronger China Yuan? The governments in the world will see the need, since they want a more balance trade figure. However, the consumers will not welcome a rapid appreciation of China Yuan.
It is better to have a steady and gradual appreciation of China Yuan.
Let us also hope that the workers in China do not ask for 20% salary increment every year. If that really happens, the cost of Chinese goods will double even if the China Yuan does not appreciate.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways.