National Affairs
Inflation in China could be a benefit
Claire Hoy
There's a joke making the rounds these days that officials sent a shipment of lead back to China. Why? Because it had too many toys in it.

And while everybody knows the economic impact that the burgeoning Chinese economy has had on our products - and more especially our prices - the New York Times reports this week that growing inflation in China is hitting Americans in the pocket books.

No doubt it's the same story for Canadians, since we too have become considerably more dependent upon Chinese imports for our consumer goods, particularly in toys, footwear and clothing.

As the Times explains, "Soaring energy and raw material costs, a falling dollar and new business rules (in China) … are forcing Chinese factories to increase the prices of their exports … "a reality which contributed to the inflation hike in North America.

Everybody understands in vague terms just how big a player China has become, but few realize the magnitude of its current impact on the world, a reality brought home to your correspondent with the recent receipt of an email on the subject.

For one thing, China has become the third largest producer of cars in the world, behind only Japan and the United States, and is rapidly closing in on the two traditional world leaders in that field.

It's also the world's largest consumer of coal, grain, fertilizer, cell phones, refrigerators and televisions, and is the leading importer of iron ore, steel, copper, tin, zinc, aluminum and nickel.

The list goes on, but you get the idea.

And for those who still think that exempting China (along with India and Russia, as the now-debunked Kyoto Accord did) from emissions rules would be a good idea, here's a little food for thought on that file.

It seems that China used 2.5 billion tons of coal in 2006. How much is that? Well, it's more coal than the next three highest consuming nations - Russia, India and the U.S. - combined.

China also has more than 2,000 coal-fired power plants and is adding a new one every week.In 2006, China passed the U.S. as the world's top carbon dioxide emitter and in 2005, China's sulfur-dioxide emissions were nearly twice those of the U.S.

The Times quotes Nate Herman, director of international trade at the American Apparel and Footwear Association in Arlington, Va., which represents several major clothing and footwear makers, as saying that "Companies are now ordering (from China) for the spring of 2009. Factories (in China) are coming back and asking for 20, 30, 40, 50 per cent price increases."

While those costs be passed on to consumers?" he was asked. "It's going to be hard to avoid some increases."

Which, of course, brings up another question of China's place in the world.

Given its status as a leading dictatorial nation, and its horrendous human rights records, will higher prices for Chinese goods buy a moral conscience for more consumers?

As things stand, sadly, most consumers would rather save a dollar or two and buy the cheaper Chinese-made goods that spend more and buy from a more reputable source.

To be fair, it's often difficult to find goods which aren't made in China, but it's also fair to say that most consumers don't make much of an effort seeking alternatives and likely don't even give a passing thought to what sort of country China is when they're picking up a cheap toy at their local Wal-Mart.

It was noteworthy last week to see Prince Charles' announcement that he will not attend opening ceremonies for the Beijing Olympics in August because of his close interest in and support for Tibet, a country which China simply took over and has brutally repressed for decades. Prince Charles has made no secret of his support for Tibet and the Dalai Lama.

To his credit - and unlike the previous Liberal regime in Ottawa - Prime Minister Stephen Harper drew loud criticism from Chinese officials when he recently openly greeted the Dalai Lama in Ottawa.

These are small steps, but steps nonetheless. The only real way to force China to clean up its act is through economic pressure, which is why, in a sordid sort of way, that country's growing inflation may turn out to be good news in the long run.

Why? Well, as we've said, if Chinese inflation means higher prices for Chinese goods, then consumers, even if they don't give a fig about the morality of their purchases, start looking for alternatives, then maybe, just maybe, China will change.

At more dramatic stance would be for all the western countries to boycott the Chinese Olympics. But that's not happening. Pity.