Wages #4 – China Goes To Quantitative Wage Increases (QWI)

This is just amazing.  As we in the developed world move forward with austerity for the average wage earner and effectively reduce average worker wages the Chinese are doing something very different to fight the income gap between rich and poor. 

Chinese  ”officials revealed this week that the country’s powerful Development and Reform Commission is drafting a wide-ranging plan to increase the benchmark salary set by the government by 15% each year in the next five years.”

 http://www.bbc.co.uk/news/world-asia-pacific-13156013

As a side note that does not sound like a nation who is going to allow their currency to appreciate significantly any time soon.  They are going to take the rise in global commodity prices and balance that with mandated wage increases, I think!

The article however focuses upon the wage increases and tax cuts which are expected to raise domestic consumer spending which it might accomplish!   However being savers my guess is that if the currency is going to stayed pegged or floated in a band around the US dollar that gold will be the continued saving vehicle of choice in China with demand for the metal just increasing.

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  • Stevo

    Having to manage an economy is a sign that something is wrong with that economy. Prosperous economies don’t need any management.

    • Windcutter

      On that basis there is something wrong with every economy on the globe.

      Governments won’t agree with you, irrespective of how prosperous an economy is, it is human nature to fiddle and try to improve things, aka manage. Governments see their role as having to govern the economy and the sheeple, constantly looking for more ways of growing this process.

      • Stevo

        Yes there is [something wrong with every economy on the globe] and it’s probably due to everyone rubbing shoulders against everyone else.

        People don’t agree with governments steering the process. They just want stuff to take for themselves.

      • Anonymous

        And impossible to do now Windy, don’t you think….??

        It would be political suicide to not intervene in an economy now, as everyone else is….

        To the voter, it would look as though the Gov’t is indecisive and doesn’t know what to do….
        That is probably half the incentive for the bank bailouts now…. One has done it, so now you all must ….

    • The filosofer

      That’s what the future will look like in a limitted ressource evironment. Fake and Artificial will be the leading words of the economy.

    • http://abellia.myopenid.com/ Andrew

      Where did you get that idea?

  • Windcutter

    The Yuan (and indeed all Asian currencies) will almost certainly appreciate against the USD, reducing the effect of commodity price induced inflation. Add in the plan to increase the workers’ wages will increase the ability of the Asians to consume more of their own produce. This is an important step in rebalancing the world’s economies.

    As you mention gold it is interesting to wonder why the Chinese government is encouraging the population to buy gold. Maybe
    1. It removes liquidity and will tend to reduce inflation by giving the Chinese an alternative to property for investment.
    2. It will create more demand for gold and hold up the price of the Chinese Central bank’s gold holdings, which it has been recently adding to, rather than buying more declining T-Bills from Tim.
    3. As a move to create a partial gold standard, although I tend to think this is not the aim.

    Anybody expect the US or UK governments to encourage gold ownership??????? No, I didn’t think so.

    • Anonymous

      I thought I read somewhere that the Chinese were going big into Silver, not Gold….???