Thursday, September 5, 2013

In China, Veil Begins to Lift on High Consumer Prices

In China, consumers pay more for retail items than U.S. consumers whom have higher average per capita income. Even the middle class consumers in China are still willing to pay the discrepancy on some particularly imported goods. Today more customers are pushing back due to the awareness of traveling abroad and the internet. Chinese consumers are willing to wait and buy imported goods from oversea websites rather than mainland China due to the price differences, quality, and safety concerns.

As China tries to improve and produced a more balanced economy, regulators are pursuing companies that they feel have manipulated the prices of their products. Regulators do this by comparing prices found in China to those overseas. The auto and pharmaceutical companies (including baby-formulas) have been fined and charged with price gouging which violates competition laws.

Companies made higher profit for years in China. Experts believe that the value for an item reflects the company’s wealth and prestige. Due to difficulties with permits and licenses, imported goods may take a while before they can be offered in Chinese retail stores. Since the permits and licenses cost money, Chinese stores incorporate them into the price of their product causing them to be more expensive. Some stores such as Starbucks and Haagen-Daz overpriced their products to create and image of both quality and wealth.  Both companies argue that the reason for the price increase is due to China’s bigger population and therefore costs more to produce them. However, not all the imported goods are more expensive in China than other countries. A can of Coca-Cola is cheaper in China compare to the U.S.

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