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.

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 labour 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 labour situation:

  • labour 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.
  • In the city of Tianjin, minimum salaries are scheduled to rise 16% to index for inflation and labour 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 labour 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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