In the past few decades, China has been the country to buy cheap goods from since their minimum wages was trivial compare to minimum wages in North America or Europe. China’s manufacturing sector became the world’s second largest economy and world’s largest exporter.

However recently, China has lost their advantage in producing cheap goods. Report by KPMG consultants says that China’s minimum wages levels are now four times greater than places in  South East Asia. Indonesia and Bangladesh are benefiting the most as rising cost in China hinders them from producing cheaper goods.

China is currently at its highest rate of inflation in 3 years; due to this inflation much of the manufacturing and production has shifted from the south and east to cheaper provinces such as Sichuan.

China’s rising manufacturing costs are due to the country’s demographic. A few years ago, China declared a one child policy to its citizens and that policy has resulted in a drastic drop in chinese local labor, thus increasing cost of minimal wages.

Quick Econ concept: Supply for labor force decreases while demand for goods and services remains the same causes a shortages in the supply—> which in results increases price of wages

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http://www.bbc.co.uk/news/business-14743131