The low cost of living in China is often confused with a low price for consumer goods. This Great Graphic from Economy Watch, shows that many consumer goods, particularly international brands, are more expensive in China. Economy Watch drew from data on three different web sites: e.weibo.com, East-West-Connect.com and sohu.com.
To understand why this is the case
requires shedding light on the cost structure of good that consumer purchase.
We have discussed this in terms of the good imported to the US and how 30-50% of the price American consumers pay is incurred locally for
marketing, storage and transportation.
While many foreign
brands have a cache, associated with higher status and prestige, there are
fundamental economic reasons why China's consumers pay more. It has to do
with the cost of internal movement of goods in China.
The domestic cost structure, such as
gasoline and tolls, boost the price of logistics. At nearly a fifth of
GDP (18.4%), the cost of logistics in China are twice what they are in high
income countries (9%). It costs more to ship goods from Guangzhou to
Beijing than from Guangzhou to the US.
The significance of internally derived costs also points to a problem with purchasing power parity and its numerous derivatives, including the Big Mac index. Simply put, the price of internationally traded goods is often impacted by local costs.
Great Graphic: High Costs of Consumption in China
Reviewed by Marc Chandler
on
February 09, 2013
Rating:
Reviewed by Marc Chandler
on
February 09, 2013
Rating:
