The second part of the MITA presentation mentioned in my July 1 post examined whether each of the main cost increase factors was a trend or fad. That the RMB is up 20% against the USD since July 2005 when it was uncoupled from the USD is not news. What's interesting is what will happen going forward.The two articles in the slide below were in different papers in Hong Kong on the same day. One writer argued that to contain inflation the RMB should be allowed to rise faster. The other author said it should be controlled and the value reduced to protect factory employment.
The conclusions I reached in the section are on the last slide in this post. They were meant to stimulate discussion and give the attendees something to consider and discuss when they returned to their companies. It worked well with these objectives.
As you can see, I am calling transportation costs a fad as I believe we will see energy technology improve quickly and oil prices drop drastically in the next few years. Labor costs is a reversible trend if production moves West in China or to other countries.
Raw materials can be lowered by switching to alternatives, but it's still a trend that they are up. The RMB will continue to strengthen, but at a much slower rate going forward.
Next time I'll go through the things I suggest companies can do to address the rising costs. This was the big finish to the presentation.
No comments:
Post a Comment