Hong Kong: Outlook for plastic and toy prices in 2010 looks uncertain

Yesterday, I had an opportunity to sit down with the principal of a major OEM manufacturer in China. We discussed the outlook for prices this year and he told me that there are three variables at play that are causing concern:

Cost of plastic

It appears that the cost of plastic has been going up with a 5% increase in the month of December alone. This could portend further increases in raw material costs.

Minimum wage increase

There is talk of a major increase in the minimum wage in China (one individual gave me a potential increase of 16%). He tells me that it is set locally and not nationally so would affect factories depending upon where they are located.

Currency valuation

Finally, there is concern that the Yuan will be adjusted up in value versus the US dollar causing goods to cost more.

Bottom line, he believes that Chinese factories will be fighting to maintain current pricing. Due to the potential volatility, however, they will be unwilling to guarantee pricing more than six months out.