HONG KONG: Wages are surging this year in China and in its main low-wage Asian rivals, benefiting workers across the region. But the increases confront trading companies and Western retailers with surging costs, and are making higher price tags likely for American and European consumers.

Mr Bruce Rockowitz, the chief executive of Li & Fung, which supplies Chinese consumer goods to US retail chains, said in a speech here on Tuesday that the company's average costs for goods surged 15 per cent in the first five months of this year compared with the same period last year.

Airline flights to Vietnam, Bangladesh, Indonesia and other low-wage Asian countries are packed these days with executives looking for alternatives to double-digit wage increases in China. But wages are rising as fast or faster in many of these countries, following China's example.

Bangladesh raised its minimum wage by 87 per cent late last year, yet apparel factories there are still struggling to find enough workers to complete ever-rising orders.

The Gap surprised financial markets on May 19 by announcing that a 20 per cent jump in costs from suppliers by the second half of this year would depress its profits, prompting a 17.5 per cent plunge of its shares the next day.

Wages in Vietnam have been rising as fast as those in China, or faster, while India has posed many problems for large-scale manufacturers. Mr Rockowitz said India's roads and ports were 'really poor', while labour issues, including government regulations, make it hard to build Chinese-style factories for tens of thousands of workers.

With costs rising in China and few alternatives elsewhere, 'you have the perfect storm for raising prices', said Mr Bennett Model, the chief executive of Cassin, a Manhattan-based line of designer clothing. The firm's costs have risen 25 to 35 per cent in the last year for cotton and fur garments alike.

NEW YORK TIMES

Source - The Straits Times (http://www.straitstimes.com/PrimeNews/Story/STIStory_675118.html)