Industry Week recently reported that China’s Producer Pricing Index increased 6.6% in February (over the previous year.) This represents the highest rate of growth in three years. Full Article

Meantime inflation has hit its highest rate in over 11 years. February inflation was 8.7% across the board with food prices up 23.3% year on year.

The current price hikes and increasing inflationary pressures are the biggest concern of the people,” Prime Minister Wen Jiabao said in a speech last Wednesday. Full Article

Oil prices (recently topping $109 a barrel) have not only contributed to the rise in inflation and prices but also to the shipping and logistics costs.

Even housing prices have increased drastically despite efforts by the central government to cool the market in 2007. According to the National Development and Reform Commission (NDRC). Beijing housing prices rose 17.5% year-on-year in December and 10.5% in 70 other major cities. Full Article

Finally the cost of labor is increasing while the availability of migrant (low-cost) workers is decreasing. As one Chinese economist said,

The country’s abundant supply of low-cost labor, seen as a backbone of its remarkable economic expansion, could stop growing in one or two years and start dropping in eight to 10 years” Article

So it could be time for international manufacturers and buyers to start looking more seriously at markets like Vietnam, India, and Mexico to increase their margins. Perhaps the infrastructure and regulatory situations in such markets are still evolving but the longer term benefits may be worth it. Alternatively, Chinese manufacturers might start looking at other ways to increase their own efficiencies.