PARIS (Reuters) - China’s role in supplying cheap consumer goods to the West could end in coming years due to rising domestic consumption and worker pay, stoking inflation and unsettling retailers in Western markets, the chairman of logistics group Li & Fung (0494.HK) warned.
“China will disrupt the world,” William Fung of Hong Kong-based Li & Fung, which supplies firms like Walmart Stores Inc (WMT.N) with clothing and toys, told the World Retail Congress, an annual gathering of retail industry executives, on Monday.
China is a country that operates in economic cycles of 30 years, Fung said, and between 1979 and 2009, it had been the world’s “factory” producing consumer goods at low prices, notably thanks to the low wages paid to its workers.
“For 30 years, China kept consumer prices low and people like us enjoyed very good margins,” Fung said.
Since 2009 China had started to boost economic growth through greater domestic consumption while wages have risen.
“When China starts consuming and with India right behind it, I predict a round of price increases and margin squeezes,” he Fung said.
Over the next 30 years, China and India could add more than one billion customers - both “an opportunity and a threat” for the retail industry, he added.
Reporting by Dominique Vidalon; Editing by Brian Love/Mark Heinrich