Sean O'Grady: We will be hit in the pocket – but better off in the long run

The famously straight-talking US president, Harry Truman, once ordered his staff to "give me a one-handed economist!" because of his economic advisers' habit of answering his questions with "on the one hand... on the other hand". The economic news from China, it has to be said, lends itself readily to that two-handed treatment.

On the one hand, then, it is bad news for us as British consumers. All that ultra-cheap electronics gear, shirts, toys and seemingly anything else made from plastic will soon be more expensive, as the cost of Chinese labour rises and some of those cost increases are passed on to us.

The significant boost to our living standards that the last decade has brought – a combination of vaulting technological achievements and low-cost Chinese production – will probably not be seen in the next one. On the other hand, we have been living in something of a fools' paradise.

The goods we so eagerly bought from China left us with a huge trade deficit, and this we funded by borrowing money from – ahem, – China. They were, in effect lending us our own money back, and this cycle could not go on – hence the crash.

Whatever the benefits of free trade in the long run, the flood of Chinese imports cost some British workers their jobs.

In terms of the "global imbalances" that distort the world economy, higher wages for Chinese workers are also a good idea, as it will refocus the Chinese economy from exports (of which we buy too many) towards domestic consumption (of which they do too little).

A revaluation of the Chinese yuan will also help this rebalancing, although Beijing seems determined to resist that.

The huge flows of Chinese savings, which headed West for us to fritter away in property booms and purchases of Chinese consumer goodies, were a root cause of the global downturn. The recent spate of strikes and demands for higher pay and better conditions in China are a symptom that the Chinese economy is beginning to overheat a little.

It is returning to near 10 per cent annual growth, helped along by a big fiscal stimulus and a recovery in world trade, which has prompted a pick up in Chinese exports, and so a pick-up in demand for the labour that makes them.

But on the supply side there has been a slowing down in the flow of workers coming from the countryside into the workshops. A lower supply of labour and a rising demand for it leads inevitably to calls for higher wages, strikes and, in due course, those higher wages will have to materialise.

So it is proving, and it will do the West a huge favour.