To: ild who wrote (61102 ) 5/16/2006 12:22:06 PM From: russwinter Read Replies (1) | Respond to Xie absolutely nails it, nobody else get this like he (and me) does! He calls it "normalizing" China's true production costs. The term I've used is paying for negative externalities, such as exposing population to death, disease and poor health. That's not free. Third, China is normalizing its production cost. Manufacturing production has relocated to China on a massive scale in the past five years due to China’s cheap labor and lax enforcement of environmental standards. While the low labor-cost advantage is well understood, the lax environmental rules and their enforcement are not well understood and may have become more important than labor costs in attracting production relocation in the past three years. China’s environmental catastrophe is a poorly understood factor in the global disinflationary trend. If the relocated factories had to subscribe to the same environmental standards as in the OECD countries, goods made in China may not have been so cheap. My guesstimate is that the lesser costs for pollution have been more important than cheap labor in the disinflationary pressure from China.
