The manufacturing sector “will remain a major part of the Chinese economy for at least the next 100 years despite strikes and increased labour cost,” according to comments published in an article in Chinese state media.
Manufacturing in China accounts for around 47 percent of GDP, but rising costs, particularly for wages, have prompted speculation that cheaper labour locations, such as Vietnam, Sri Lanka, Bangladesh and some countries in Africa, are poised to benefit from a transfer of manufacturing investment away from China.
This may happen to some degree, especially in highly cost-sensitive products manufacturing, but larger operations targeted at increasingly confident Chinese consumers, rather than produced for export, seem determined to maintain their presence in China. After all, retail sales in China for the first five months of 2010 rose 18.6 per cent year on year, according to the National Bureau of Statistics.
The article published by People’s Daily, states that it now costs “nearly four times as much to employ a Chinese worker in the garment sector than someone from Vietnam.”
By contrast, the average annual manufacturing wage in China’s Guangdong province “increased by 144 per cent from 1998 to 2008,” according to figures from the Economist Intelligence Unit. Wages in lower-cost provinces are rising even faster in percentage terms – up by 263 percent in Hunan province during the same period, and by 258 percent in Guizhou.
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Can Chinese Economy Ride Manufacturing Wage Rises?
The manufacturing sector “will remain a major part of the Chinese economy for at least the next 100 years despite strikes and increased labour cost,” according to comments published in an article in Chinese state media.
Manufacturing in China accounts for around 47 percent of GDP, but rising costs, particularly for wages, have prompted speculation that cheaper labour locations, such as Vietnam, Sri Lanka, Bangladesh and some countries in Africa, are poised to benefit from a transfer of manufacturing investment away from China.
This may happen to some degree, especially in highly cost-sensitive products manufacturing, but larger operations targeted at increasingly confident Chinese consumers, rather than produced for export, seem determined to maintain their presence in China. After all, retail sales in China for the first five months of 2010 rose 18.6 per cent year on year, according to the National Bureau of Statistics.
The article published by People’s Daily, states that it now costs “nearly four times as much to employ a Chinese worker in the garment sector than someone from Vietnam.”
By contrast, the average annual manufacturing wage in China’s Guangdong province “increased by 144 per cent from 1998 to 2008,” according to figures from the Economist Intelligence Unit. Wages in lower-cost provinces are rising even faster in percentage terms – up by 263 percent in Hunan province during the same period, and by 258 percent in Guizhou.
This entry was posted on Wednesday, July 28th, 2010 at 2:28 am and is filed under News commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.