Inflation in China

The following article does a good job of demonstrating inflation issues in China and highlighting its risks for the global economy. Several of our customers have experienced significant price increases this year, so we're living this situation.

http://www.marketwatch.com/news/story/chinas-inflation-its-spillover-whole/story.aspx?guid={804FFB25-BA02-4737-B3C7-0E57DB5F4AEE}&siteid=yahoomy

Although inflation in China is a big issue, there are several things working to offset it. First, the Chinese government is working to improve infrastructure and offer tax incentives for factories to locate in rural Western and Northern areas of the country. These areas have lower costs as they have not benefited yet from the strong growth of the economy.

Second, productivity gains are really beginning to take hold in Chinese factories. There is huge potential for productivity growth in China as it has previously not been a focus at all.

For OPS America, we know we need to help our current partner factories improve their productivity and work harder to find new partners in the north and west. Both of these are challenges for us in 2008 and, likely, beyond.