China Experiences Growing Pains – Part 2

Posted: February 21, 2011 in China, Economic Development, India
Tags: , , , , , , , ,
A couple of weeks ago I wrote this post about increased labour unrest in China caused by a reduction in exports. It seems there is more to this story.
At least two commentators, The Economist and China Briefing, believe that China’s Central Government is intentionally allowing this unrest to go unchecked.
Two reasons are suggested. The first is that any anger directed at the foreign multinationals who source goods from China is anger not directed at the Government. This is a speculative claim. The second is more clearly supported by the facts: that China wants the workers to succeed in raising their living standards, even if it means we see less of those low-cost factories churning out goods stamped “Made in China”.
China’s Government naturally wants the country to become more prosperous generally and in the next phase it wants its vast manufacturing sector to increasingly sell goods for the country’s internal market. For that to be possible, average wages have to increase so that Chinese citizens can afford to buy more goods. So if the workers succeed in their claims for higher wages, more power to them.
And succeed they have. Migrant workers wages increased 17% in 2009. In the province of Guangdong the minimum wage was increased 20-21% in 2010 and will increase a further 18.6% in a week’s time, on 1 March. That is a 66% wage increase in just three years. In a few years, Malaysia will be the only developing nation in Southeast Asia with higher wages.
As it stands, China’s minimum wage is already twice as high as India’s and 50% more than Indonesia’s. A survey of buyers of China products who expect to start sourcing elsewhere found that 57% expect to increase sourcing from India.
Meanwhile in Guangdong and elsewhere wages are only half of the story. Conditions of work continue to be highly demanding, with long hours and draconian restrictions on freedom and until those improve we will see more protests.

China's manufacturing hub, soon to be officially one megacity. Image:The Telegraph

Sources:

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Comments
  1. […] 21/2: I’ve written a new post carrying on this […]

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