Inflation is going to get you.

Honda China offers a 24% pay raise to end the strike while Foxconn has already promised to hike salary by 33%. Though one may say the raise is relatively mild given a low base, the absolute amount is huge taking into account numbers of people these factories employ. Foxconn, which employs 800,000 people in China for example, has to dole out an extra RMB240 million. Given the thin profit margin and high degree of operating leverage, the management of Foxconn has taken a very dangerous step.

Anyway, 24% here and 33% there, and what does that mean to the rest of us? First, copy cat throughout the nation shall pressure their bosses to open their wallet. Second, sooner or later, companies that are not competitive enough have to fold up, bowing to the pricing pressure from the supplier i.e. the workers and the customers namely Walmart or Apple. The end result would be a higher aggregate wages in China, suggesting to us a remote possibility of cost-pushed global inflation (not to mention the printing press ranging from the Fed to the ECB). Therefore, superman Li Ka Shing hasn't lied to us. The inflation is coming, and it is going to bite us hard.