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Sun, Oct 17, 2004 - Page 12 News List

Behind the rush in China, a more complex picture looms

Chinese companies are increasingly being squeezed between rising raw materials prices and the inflexibility of big retail customers

NY TIMES NEWS SERVICE , GUANGZHOU, CHINA

"I like to say that Wal-Mart has every day a low price, Chinese steel every day has a new price," Yen said. "If I ask for a price increase, they will say, `Either you have to accept the current situation or we will take our business elsewhere.'"

Rising crude oil prices have become a preoccupation for many companies in China, which relies far more heavily on energy-intensive manufacturing than wealthy industrialized nations do.

"That leads to everything increasing in price -- the gas and the plastics -- so that makes it hard for us to keep the prices the same," said Zhou Hui, a sales representative for a local mirror manufacturer that uses plastic frames for its mirrors.

Rising prices for rice in particular, up close to 30 percent in the last year although moderating lately because of a plentiful harvest, have made the lives of migrant workers more difficult in the cities. Wages have been rising in some cities, but not others.

In some cases, wages have kept up with consumer prices, which were 5.3 percent higher in August than a year earlier despite price controls on many consumer goods. Inflation has been rising almost twice as fast on goods purchased by corporations, as tracked by the Chinese central bank.

Chinese agencies are expected to release a flood of economic statistics next week for last month and for the third quarter, and these could show some slackening in inflation because of moderating increases in rice prices.

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