‘Made in China': The World's Factory is Losing Its Shine

China, the 'world's factory', is losing its shine. And to a great extent this has been the result of the rise in workers' wages in most major cities. How has this happened?

Although the international financial crisis saw a minimal increase in the basic wage in 2009 in China, a wave of big wage increases nevertheless materialized in 2010. The 12th Five-Year Plan emphasized that residents' income should grow commensurately with economic development and that labor wages should grow commensurately with labor productivity. As a result, many provinces raised the minimum wage for workers.

According to basic salary statistics issued by China Labor Consult, 16 provinces raised their minimum wage in the first six months of this year alone, and most of the increases were of over 20%. According to the table on the right-hand side comparing the 16 cities, Sichuan saw the highest raise, of 38%, a heart-breaking figure for employers, while Shenzhen had the highest basic salary of RMB$1,500 per month, a frightening figure for factory owners.

Wage increases are now very much on the corporate agenda as a result of fierce competition for labor. The situation is particular severe in coastal regions where the cost of living is much higher than in inland cities. Workers are now less willing to travel a long way to earn what is only enough for their daily necessities.

The new industrial regions of the inland cities now also engage in inter-provincial competition for labor, while factories along the coastal strip have been lowering their admission standards for workers simply to recruit more labor. Higher wages of course are another important factor. For example, one Shenzhen company announced it would raise the basic wage by as much as 20%. Some industry experts forecast that wages will increase by 20% or even 30% annually over the next five years.

Read more: Tradegood - ‘Made in China'