Increases in minimum wages have been announced before the Chinese New Year ranging from 10 percent in Beijing to 15 percent in export-oriented Shanghai and Jiangsu. Japanese automaker Honda said two weeks ago it had offered a 24 percent pay rise to workers in China to end a strike that has cast the spotlight on mounting labour unrest in the world’s number-three economy.
However, the impact of such an increase will be softened by two factors.
Firstly, it is likely that increases for workers other than those on the bottom level will be less as Beijing makes a conscious effort to be seen to do a little to reduce income gaps.
Secondly, Chinese firms, whether state or private, are largely autonomous in their wage policies. Most too have in recent years shown a determination to maximize profit and reinvestment. Getting bigger has been the main goal. So there is plenty of resistance to paying higher wages unless deemed necessary to retain workers.
Still, when comparing Chinese engineers’ wages with European, the ratio has been divided by a factor of 2 within a period of 3 years for European countries, falling from 10 to 5. On top of these local wages ‘increases, w e can also anticipate that inflationary pressures will force the Chinese authorities’ to let their Yuan currency fluctuate in a wider range and appreciate versus the US dollar, and even more versus the Euro. If increases in Chinese workers’ pay packets and relative appreciation of the Chinese Yuan aren’t likely to change the fact that China has become the “workshop of the world”, it might make moving engineering and design teams to China less attractive.