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Western companies will have to come to terms with the rise in labor in China
13.02.2012 1846

Western companies will have to come to terms with the rise in labor in China

The average wage of workers in China over the past four years has grown by 50%, despite the global crisis. For the country's economy, this is good news, as along with incomes, the expenses of citizens increase, according to analysts at Capital Economics. But foreign companies have to adjust their strategies in connection with the rise in labor costs.

The popular expression that it’s easier to pay ten Chinese people than to make one American work is losing its relevance. According to Capital Economics, over the past year, the average salary of a Chinese peasant who came to work in the city increased by 21% to 2050 yuan ($ 325). In general, despite the global crisis, since 2008, the average salary of migrant workers in China has already increased by 53%.

Capital Economics predicts that the upward trend in wages in China will continue. In the current five-year plan, the government has laid down the growth of minimum wages by 13% per year. This indicates a deep transformation of the Chinese labor market and means a significant increase in domestic consumption. “This will increase the income of the Chinese, and hence their costs. At the same time, this will stimulate the growth of industries that require accurate and skilled labor, ”said Mark Williams, economist at Capital Economics.

The total number of Chinese workers continues to grow, and the proportion of people between the ages of 16 and 34 years, the most sought after in the manufacturing sector, will remain stable until the 2015 year. Moreover, if in the past the Chinese peasants, having earned money, returned to the village, now they remain in the cities. Chinese under the age of 30 simply don’t know how to cultivate the land, the study notes. “For them, the road to production and the service sector is a one-way ticket,” Capital Economics emphasizes, explaining that this will make any possible decline in production and the service sector extremely gradual.

The growing needs of Chinese hired personnel have to be taken into account by foreign employers. According to a Hays study, more than 80% of companies this year plan to increase salaries by more than 6%. In general, salary growth will be from 6 to 12%. The increase in workers' wages is largely dictated by the growing social activity of the Chinese. In 2010-2011 years, mass strikes took place in the country at the factories of leading foreign automakers (Toyota, Nissan, Honda), as well as manufacturers of electronics. Similar actions have become more frequent in recent months. So, at the end of December, about 8 thousand workers of the South Korean LG Display factory in Nanjing went on strike - they were dissatisfied with low earnings compared to foreign personnel. In mid-January, a strike was held by about 2 000 workers at Changhe Auto (a joint venture with the automaker Suzuki) in Jiangxi province, as well as 4 000 workers at the Japanese Sanyo factory in Shenzhen (Guangdong Province). And here the main requirement is an increase in wages.

In search of cheaper labor, some Western manufacturers are already forced to relocate their production to more backward regions of the country, experts say. True, with a few exceptions, the issue of transferring enterprises to neighboring countries that are more attractive in terms of labor costs in Asia is not yet discussed. “With the exception of the production of low-quality textiles, which is slowly moving to other, poorer countries, companies are in no hurry to leave China. So far, they just have to transfer production to other, less developed and poorer areas of the PRC, which is again useful for the development of the country, ”said Mark Williams. In his opinion, manufacturers will begin to leave China due to the high cost of labor in 10-15 years.

According to Kent Dan, economist at the London School of Economics, Chinese labor can still be considered cheap. “At the same time, a serious problem for foreign companies was the appreciation of the renminbi against the world's leading currencies, especially the euro, the British pound and the dollar. Because of this, the production of goods and services in China is now a third more expensive than in the 2009 year, ”the expert said. About this writes rbcdaily.ru.

The average wage of workers in China over the past four years has grown by 50%, despite the global crisis. This is good news for the country's economy, as it increases along with revenues ...
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