After 13th employee death reported at Foxconn China plant, the Taiwan-based LCD TV makers, Foxconn Electronics (Hon Hai Precision Industry), raises minimum wage to 2000 yuan in order to avoid more suicide at their plant. As a result, strikes from other overseas-funded enterprises in south China be of common occurrence. Workers want to get more wage. For this reason, investors start worrying about whether the cheap Made In China will disappear.
How about the raise speed of wage?
Some recent disputes have involved with considerable salary increases, such as foxconn, production workers salary increase 66%, Honda (7267. T: prices) part staff salary increase at least 20%.
Many cities in China increased minimum wage standard by 20%. But overall, multinational enterprises pay salary standard this already exceeded the threshold. Moreover, because for help in 2009 export enterprises through financial crisis, the minimum wage has been frozen, now line moves but is a rise of late.
According to the opinion from chief economist of UBS, by 2010, China is expected to increase overall wage around 15-20%.
How will enterprises respond?
Low value-added industry, such as light and textile industriy and electronic, transfer to the Midwest. This is coincide with the west development strategy of the government.
Some Chinese native and foreign enterprise already began to move to Vietnam, Bangladesh, which offers lower cost manufacturing services.
There are signs show that Mexico and eastern Europe will benefit this trend. However, for large buyers, China’s strong manufacture ability, the first-class infrastructure and intensive suppliers can’t replaced by other countries for a long time. It’s to say, in a short period, the cheap Made In China will still popular with all over the world.
How about the expectation of employment and wage?
Population experts think that China’s population in will achieve the peak in about 2015 – 2016. After that, even if the trend, farmers migrant to cities, Chinese labor surplus will weaken.
This will expedites the structural upward pressure, thus turn over the past decade to laborer compensation of gross domestic product (GDP) from 53% tumbled to relaxed trend. According to the data, in America and ginny in Japan, the proportion of 57 percent respectively with 51%.
In short, Chinese workers disposable income will increase, and the capital share of national income, thereby decreases profit pressure. From 1999, profits of GDP has jumped from 19% to 31%.
