Wage and price dynamics in a large emerging economy: The case of China
Wage and price dynamics in a large emergingeconomy: The case of China
Carsten A Holz
and Aaron Mehrotra
This study finds that the growth in labour costs in China is not passed through fullyto final prices in China, neither in the tradable goods sector nor in the economy as awhole. This probably reflects the strong pressure on profit margins from a highlycompetitive environment, especially in manufactured goods. The potentialimplications of labour cost increases in China for global inflation pressures are alsodiscussed.Keywords: Labour costs, inflation, China, global economic slack, globalisationJEL Classification: E31; F42; J30
The views expressed in this paper are those of the authors and do not necessarily represent thoseof the Bank for International Settlements. Bilyana Bogdanova, Lillie Lam and Agne Subelyteprovided excellent research assistance. Corresponding author: Aaron Mehrotra, email:firstname.lastname@example.org. We are grateful to Philip Turner, Frank Packer, Andrew Filardo, JamesYetman, Guonan Ma, Chang Shu, Marco Lombardi, Feng Zhu, Tomoyuki Fukumoto, Junhan Kim,Woon Gyu Choi, and seminar participants at the Bank for International Settlements, Bank of Japan,the Bank of Korea, the City University of Hong Kong and the Hong Kong Institute for MonetaryResearch for very helpful comments and discussions.
Stanford Center for International Development, Stanford University
Bank for International Settlements, Representative Office for Asia and the Pacific