Lang Xianping Analysis Of Low Wages And High Prices In China

Lang Xianping: Ph.D., Walton business school, University of Pennsylvania; Chinese University Hong Kong Professor; former Walton business school, Michigan State University, Ohio State University, New York University and Professor Lai.

Lang Xianping is a world-class corporate governance and financial expert, focusing on corporate governance, project financing, direct investment, corporate restructuring, mergers and acquisitions, bankruptcy and so on.

At present, China is low wages and high prices, while the United States is a high wage and low price. Combining these factors together, the gap between the real income of China and the United States is far higher than that of monetary income.

This phenomenon is reflected in real life. American workers can feed their families on the strength of one man alone, while in China's working class, even if two couples have stable jobs, they still have enough children to bear together, but sometimes they need help from their parents.

Why the gap between Chinese and American workers in monetary wages seems to be narrowing, but the ability of Chinese workers to support their families is decreasing, even to the fact that two couples work together to support a child. This situation is unique in the history of world industrial development.

In addition, it is worth mentioning that in recent years, China's

What causes such a reality? The answer is very simple: China's finance.

Whether it is the low price in the US or the high price in China, it is the result of China's fiscal operation.

This is also the fundamental reason why the US government is so concerned about China's reform and opening up.

First, there is a certain relationship between low prices in the United States and China's financial subsidies.

China

Secondly, China's high price is the result of China's implementation of high taxes and inflation.

China's tax revenue accounted for 64% of the share of consumer goods, while the proportion of commodities itself was only 36%. The average Chinese citizen had a tax of 64 yuan for each purchase of 100 yuan, nearly 1.8 times that of the commodity itself.

Such astonishing high taxes added to commodity prices will naturally lead to soaring prices.

But this is not just the case. The problem is far from over. The Chinese people also have to shoulder the huge inflation caused by export commodities.

Because China exports $1 per commodity, the domestic market will be increased by 7 yuan at a rate of about 1:7.

With China's current foreign exchange reserves of US $2 trillion and 300 billion, the additional RMB issued in China will exceed RMB 16 trillion, equivalent to nearly 5 times the circulation of 3 trillion and 400 billion yuan in 2008.

These huge sums of money put in by foreign trade and export have all been pferred to the common people in an inflationary way, resulting in a large depreciation of the currency in the hands of ordinary people, and prices will naturally rise correspondingly.

From this, we can see a phenomenon that makes people cry and weep: the more export commodities are, the more foreign currency we earn, the more unfortunate people will be.

The export of manufactured goods has been exported to foreign countries, and the US dollar has also been lent to foreign countries, and the Renminbi that has been added to it has remained in the domestic market and become a "waste paper" without any commodity basis.

The circulation of these "waste paper" with existing currencies will inevitably lead to a substantial depreciation of the existing currencies and a sharp rise in prices.

The result is that the Chinese people have not only lost most of their wealth, but also lost wealth in their hands.

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The United States is just the opposite of China.

The currency in the US market flows to China, and China's goods flow into the US market.

In this way, the reduction of money and the increase of commodities will lead to price declines.

Plus the US dollar flowing to China has been refunded to the US treasury through the purchase of US Treasury bonds. The US Treasury can use Chinese money to increase the supply of public goods, which can further reduce the price of goods, thereby improving the purchasing power of the American people.

In short, if we stand on the position of the Chinese and American people instead of standing on the national standpoint, the fact will be clearer. The goods produced by the Chinese people are bought by the US dollar, while the US dollar is taken away by the Chinese government to buy US Treasury bonds; the American people get the goods, and the Chinese government gets the US dollar, and the only thing Chinese people get is the depreciation of their existing currency.

As a result, the United States issued US dollar notes to China, and China issued Renminbi paper money to the common people. The United States used these banknotes to exchange all kinds of commodities needed for the American people. Instead, China diluted the value of the renminbi and the purchasing power of the masses due to the large increase in paper currency.

The key link in the magic cube of China and the United States is the separation between the increase in money and the increase in goods: that is, China's newly added commodities flow to the western countries such as the United States, while the newly issued currencies remain in the Chinese market, which constantly dilute the purchasing power of the people's money.

This is a very dangerous trend.

This is why the United States has high wages and low prices, while China has in turn the low wages and high prices.