In China, Fear Not Wage Inflation's Impact

Demands for higher wages have attracted a lot of attention from investors closely watching China's inflation rate. China will soon enter a period of wage inflation, but wage increases will come too quickly.

Experiences in Taiwan and South Korea in the mid-1980s shows that if per capita GDP exceeds US$ 3,000, wages will significantly increase. In 2008, China's per capita GDP rose just over US$ 3,000. However, China is largely an agricultural country, and pay raises and their consequences will not be as serious here as they were in Taiwan and South Korea.