Ch.1-How the Chinese dragon brought prosperity to Canada

In this article it explains how not long ago was the age of inflation where people would complain are the high prices as much as they would complain about the weather. However today, we see that prices have been relatively stable and according to the Royal Bank of Canada durable products (not including cars) went down 13.4 percent between 1995 and 2006. On average each year prices drop 0.8%.

Now with the assurance of stable prices, Canadian stores have been flooded with products from a country on the otherside of the world, China. Consumers use to be taken aback by how much an item would cost, now they are shockedn with how little something can cost. For example, a chinese-made TV could cost as little as one hundred dollars. How could China's products save us Canadians so much money? Economist Louis Morel (Bank of Canada) says that due to the massive import flood from China, Canada's inflation rate has reduced by 0.1 percent per year. It may not seem like much but for Canadians it is an extra billion dollars in their pocket. Mr. Morel says that it may not seem like it now, but in the future developed economies will benefit from China's restraint on global prices. He points out that it wouldn't matter if China's prices rose," as long as the price of these goods remains lower than what can be produced in Canada, or by other trading partners, and as long as the Chinese share of Canadian imports continues to rise."

There are two other ways that China helps keep our inflation rate low. For one thing, it reduces the inflationary pressure that usually occurs when the economy heats up, spending increases and producers can't keep up with demand. In a globalized economy with free and rapid trade flows, some of that demand can be met by Chinese imports. For another, China helps our central banks gain face. If inflation stays low in part thanks to cheap Chinese imports, then institutions like the U.S. Federal Reserve and our Bank of Canada accumulate credibility as inflation fighters and inflationary expectations diminish.
http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20071003.wibasia03/business/Business/businessBN/ctv-business

This article relates to an opportunity cost for China because even though China provides our economy with low prices, it impacts China's economy because it puts pressure on them to continue with the cheap labour that is shown in factories. If China were to raise their prices it could cause a disagreement between the trading amoungst the two countries. Even with China's massive flood of exports to foreign countries you have to keep in mind that the profit that is going back into China is not as great as what one would expect. That is why the living standard of China is not as high, China has over one billion people residing in the country. Factory workers who work long hours and have a very very very low income, could have a better lifestyle if they had better wages. If China were to raise their prices on export products then they would be able to have a higher income and be able to work towards changing the work conditions of factory workers. However this would impact how many workers businesses would be able to hire, how many products would be sold, and whether or not citizen in Canada would continue to purchase products made in China. Whenever consumers go on vacation and think of China, they automatically think about the good deals and money saving they will be able to have.