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The Latest On The Wage Inflation Mess Breaking Out All Over China

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The People's Bank of China announced a 0.25% rate hike today to curb rising inflation.

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High wages are reported to do more damage to an economy by pushing up inflation, than high commodity prices. Now, China is grappling with rising wage and commodity prices and a disappearing labor pool.

The situation has got so bad, the Asian giant is said to be rejecting orders from Wal-mart and other Western retailers.

In a new report Williams Inference analyst John Trudigan gives us details on the Chinese labor situation:

  • Labor shortages have been prominent all over China especially in major coastal manufacturing cities. There is a 555,000 shortfall in major cities in the region that include Guangzhou, Shenzhen, and Dongguan. In the Guangdong Province officials estimate a 1 million shortfall.
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  • In the city of Tianjin, minimum salaries are scheduled to rise 16% to index for inflation and labor shortages. Tianjin already raised wages by 12% in April last year.
  • Shenzhen increased minimum wages 20% to 1,320 yuan ($210) in April this year and now has the highest minimum wage in China. The city continues to have labor shortages.
  • Shanghai raised minimum wages by 14%. Guangzhou increased the minimum wage by 18.2%, and the coal-rich province of Shanxi raised minimum wages by 15.5%, a year after an 18% increase.
  • In late April this year, Shanghai officials agreed to cancel a fuel surcharge and lower other fees to appease striking truck drivers.

See also: Why Gary Shilling things China is headed for a hard landing >

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