Labor Law Guy

China Plays Its Prize Card(s) to Re-energize Economy

Posted in Random Musings by laborlawguy on March 2, 2009

What is the Prize Card for China? Cheap labor, of course, and now that some 20,000 manufacturing firms have closed down in the past year, that means there are some 20 million migrant workers looking for jobs.

And they’re finding them–at lower wages. And the manufacturers are also getting generous export tax rebates. It also appears that Treasury Secretary Timothy Geithner’s comment about China’s manipulation of its currency, the yuan, was spot on–the yuan has stopped its appreciation against the dollar to help bring down export costs.

Government officials have also conveniently stopped enforcing the contract labor law that took effect at the start of 2009 and sent salaries skyward.

The result is that Chinese goods are now falling in price, and the flight of production to lower-cost countries such as Vietnam and India has been halted.

Now, if people in the West can just find enough money to buy all those Christmas toys, China will be sitting on top of the world again. Does Obama have a bailout plan?

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