China's woes may lead to more pricey Xmas here

China is feeling some economic strain of its own of late.

CBS News correspondent Celia Hatton reports that could impact the prices American consumers pay during the upcoming Christmas shopping season.

The employees at one sportswear supplier outside Shanghai are rushing to fill an order for 15,000 bike shirts, and getting paid more for their efforts than ever before.

Liu Ling, who tracks inventory at the factory, has seen her paycheck grow from $130 per month in 2007 to $320 per month now.

"If you work in a factory, you can make a bit of money and cover your basic expenses," Liu said through a translator.

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A shortage of skilled workers is also driving up demand. Employee-wanted ads, like these in Beijing, now regularly promise benefits like free housing and health insurance.

But Liu is still living month-to-month. Surging along with salaries is the cost of living. Food and housing prices have ballooned. The simple house Liu shares with her husband has TV, but no running water.

"The price of everything has increased a lot compared to before, for clothing or vegetables or meat," Liu said.

Complaints about the rising cost of living are common across China. The government says it's trying to help workers cope by forcing employers to hand out bigger salaries, but it's a tricky balancing act: If wages escalate too much, manufacturers might leave China in search of cheaper labor elsewhere.

Liu Ling's boss tries to attract loyal employees with free meals and bonus pay, but he worries he'll eventually be squeezed out of the country once known as the world's factory.

"Long-term, I'm looking at possibly thinking of production in another third world country. At the moment I'm thinking of places say like the Philippines is a place to consider," said Looi Chan, co-founder of Legend Sports.

In the short term, rising salary costs will be passed on to customers.

Toys 'R Us is one of several major U.S. retailers already warning its prices will be higher this Christmas because of China's rising wages.

But there is one possible bright spot for the U.S. Economy: if China's surging inflation levels off and higher wages hold, millions of Chinese workers might have that extra money to buy American.

  • Celia Hatton

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