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2010-11-08 | All chapters

Rising wage issue up for debate
Global Times, 8th November 2010

In response to concerns from the European business community over growing labor costs, a senior government researcher said that rising domestic wages would not severely weaken the nation's low-cost advantage.

Long Guoqiang, director general of Development Research Center at the State Council, asserted that with domestic-productivity improvements, relatively inexpensive property costs and an abundant talent pool, rising labor costs should not be a great concern for foreign firms.

Long Guoqiang made the comments while speaking at the European Chamber of Commerce in China's 10th Anniversary Business Conference, held Friday in Beijing.

A majority of the European Chamber's 1500 member companies, polled for the European Chamber's business confidence survey 2010, expressed concern over rising wages in China.

In the survey, he European Chamber members expressed growing pessimism on the issue and expect the problem to continue for the next two years, according to the report, released in June.

As an indication of what is to come in the Chinese mainland, minimum wages rose in 27 out of 31 provinces, autonomous regions and municipalities (excluding Hong Kong, Macao and Taiwan) so far this year, with the average growth of between 22 and 30 percent, government data shows.

The issue is expected to be on the government's agenda for the country's 12th Five-Year Plan.

The rising wages are sending shivers through foreign-invested companies in China, with some already looking to transfer manufacturing to countries in Southeast Asia, such as India and Vietnam, in search of cheaper labor.

The center's Long believes increases in national productivity will help to offset labor-cost increases.

According to the International Labor Organization, during 2000-2005, productivity increased by 53.4 percent in China, compared with 26.9 percent in India and 15.5 percent in ASEAN members.

Despite the relatively faster rising wages, China's labor productivity is improving faster than other emerging economies, and therefore China still has advantages over other countries.