Shanghai: The price advantage that Chinese products had in the US seems to be diluting somewhat, as rising energy and raw material costs, along with a falling dollar propel prices of Chinese imports into the United States to new highs.

According to reports, the rise was around 2.4 per cent over past year. However, along with its products, China seems to be exporting some of its inflation to the US as well, as higher energy and food costs that reflect China's growing demand on global resources contributed in some measure to inflation in the United States, which was at 4.1 per cent in 2007, against 2.5 per cent in 2006.

Predictions indicate that cost pressures could make American consumers pay almost 10 per cent more this year on consumer goods including toys, clothing, footwear and other consumer goods.

Economists say that this could well be the beginning of the end of the era of ultra-cheap Chinese goods, having proclaimed for months about the petering-out of China's decade-long role of keeping a lid on global inflation.

Chinese imports comprise 7.5 per cent of American spending on consumer goods, though it has larger chunks of a number of popular product categories, such as around 80 per cent of toys, 85 per cent of footwear, and 40 per cent of clothing. Analysts point out that even in segments where Chinese market share is relatively small, their low prices are the reason other producers keep costs down.

What remains to be seen, according to analysts, is just how the world's production house makes wholesalers pay more for their goods, and if retailers can succeed in passing on the bulk of their higher costs of production on to American consumers. Reports suggest that companies sourcing from are already reeling under mounting cost pressures, which they say will weaken their profits and possibly disrupt their supply chains.

In the absence of credible data, estimates peg the rise in average Chinese wages at around 80 per cent or higher, estimating the lowest wage at about $125 a month.

Some cost pressures are coming from the removal of incentives that Beijing earlier had in place to benefit exporters of cheap products, mainly to tackle complaints from the US and Europe about China's growing trade surplus. China has so far removed or reduced tax rebates on hundreds of items for export, including toys, apparel, leather, wood and other goods, effectively taxing those industries.

Chinese exporters on the other hand, say that the timing of the rebate cut was horrendous, given that factories have been struggling to cope with power shortages, higher raw material costs, rising wages and inflation.

Chinese factory owners say a tough new labour law that came into effect on 1 January complicates the hiring and firing process, and is almost guaranteed to increase labour costs even more. This is in addition to ongoing labour shortages, strikes, and other labour turmoil arising from the implementation of this new law.