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Inflation Grows in China’s Rice Paddies

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MAARSSEN, Netherlands (August 31) – Chinese factories produce 61% of the world’s exported bicycles, 51% of sports shoes and 46% of knives, forks and spoons. But the picture appears to have dramatically changed this year – while the fearful reaction from rival manufacturers in the rest of the world is peaking. While prices for manufactured […]

MAARSSEN, Netherlands (August 31) – Chinese factories produce 61% of the world’s exported bicycles, 51% of sports shoes and 46% of knives, forks and spoons. But the picture appears to have dramatically changed this year – while the fearful reaction from rival manufacturers in the rest of the world is peaking.
While prices for manufactured goods continue to fall in China, food prices have sky-rocketed. Figures show meat and poultry prices in China rose 23% in the year to July. Fish rose 17%, eggs 34% and rice 32%. Mostly this reflects structural changes like shrinking arable land (rice paddies replaced by factories), a diminishing supply of rural labour (one quarter has left for the city) and government intervention. The supply of labour has tightened so much that one report estimated a shortfall of 2 million workers in cities in the Pearl River delta, which include Guangzhou and Shenzhen. This means bicycle factory owners in Guangzhou are being forced to offer something more to convince farmers to leave their rice fields in Guizhou, just as bicycle export orders are accelerating.
They have already raised wages and paid for holidays home during Chinese New Year in order to retain the workers they have. It will change growth patterns rather than slow it down, pulling Chinese heavy industry further up the value-added chain, like Japan, Korea and Taiwan before it. But rising wages must at some stage flow into rising prices. The inflationary impulse will affect China’s export markets. (MH)

Giant Splits-Up Model Introduction
LELYSTAD, Netherlands (August 27) – Each year a whole new-line up – somewhere around September – for Giant in Holland this stops this year. The company has decided to split-up the introduction of new models into phases. This will ensure that the right bikes reach the dealers at the right time. No need for road bikes when there’s a metre of snow on the roads is there? Giant Europe recently announced that in Holland introduction of the 2005 models will be in two stages, but some models will be phased in or out of the line-up during the season. “Holland will act as the pilot-market,” said Giant Europe Vice-President Eddy Meerens who added that the new strategy is intended to be introduced in other markets too. “This will also help fight the end-of-season-discount, which would be an excellent result for our business.” (MH)

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