Wages Are Creeping Up In China

Via NYT:

The cost of doing business in China is going up.

Coastal factories are increasing hourly payments to workers. Local governments are raising minimum wage standards. And if China allows its currency, the renminbi, to appreciate against the United States dollar later this year, as many economists are predicting, the relative cost of manufacturing in China will almost certainly rise.

…the hourly wage in southern China is only about 75 cents an hour. But economists say wage increases here will eventually ripple through the global economy, driving up the prices of goods as diverse as T-shirts, sneakers, computer servers and smartphones.

…last Thursday, Beijing announced that it would raise the city’s minimum monthly wage by 20 percent, to 960 renminbi, or about $140. Many other cities are expected to follow suit.

Analysts say the changes result from the growing clout of workers in China’s economy, and are also a response to the soaring food and housing prices that have eroded the spending power of workers from rural provinces. These workers, without factoring in the recent wage increases by some employers, typically earn $200 a month, working six or seven days a week.

Thoughts:

With rising wages, exports from China will become more expensive. Also, as one researcher stated in the article, “China isn’t going to lose its manufacturing base because it’s got a huge domestic market.” The increases in wages indicate that, “They don’t just want to be the workshop of the world. They want to produce high-tech goods.”

Daniel A.
Summer Analyst
Analyze Capital LLC
email:analyzecapital@gmail.com