Company chiefs concerned about future of China trade

20 August 2010

20 August 2010 | Lindsay Clark

Six senior executives in 10 are worried about rising wages in China affecting their companies’ financial performance in the next 12-24 months.

The results come from a survey conducted by investment bank Credit Suisse.

When asked about rising wages in China, which has become a key manufacturing centre, 4 per cent of the 28 company senior executives interviewed said they were extremely worried, 36 per cent said they were very worried and 21 per cent said they were worried.

Another top concern about increased costs in the region is transport. Eleven per cent said they were extremely worried about transport costs going up over the next two years.

Industrial unrest and increasing wage demands have forced up costs in China, while pressure from the US has led to increases in relative value of the renminbi, the Chinese currency, also leading to an escalation in prices buyers pay.

At the same time, firms are unlikely to be able to pass on cost increases to their customers. A quarter of firms in the Credit Suisse survey said they would not be able to raise prices, so all hikes would have to be absorbed. Sixty-eight per cent said prices could be increased, but not enough to avoid erosion to their margins.

Sixty per cent of the survey respondents worked at private sector companies with sales of more than $500 million (£322 million). Those quizzed worked at consumer, industrial and technologies companies that sourced a large number of their goods from China. Two-thirds were based in US, the remainder in Europe. About half were chief executives, with the rest split between finance and purchasing managers.

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