Rising Wages Hit China Investors

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China’s dramatic ascent to world number two economy has seen a trickle down effect for workers at every level of society, and wages have dramatically risen in the last few years

However, whilst this was initially good news for locals, increasing numbers of foreign companies are pulling out global workshop, turned off by rising production costs. A number of firms have now turned their attention to more competitive sites in places such as Taiwan and South East Asia.

Over the past seven years salaries for many in China have almost doubled. On top of this, companies are now mandated to pay into Chinese workers’ pensions and health insurance plans. Workers are increasingly aware of their rights, and aren’t afraid to take their services elsewhere if the price if right.

Chinese factory workers now switch jobs whenever they can get a higher salary

Mr Chu, chief executive of the Fair Friend Enterprise Group, labels the pace of change as ‘scary,’ saying, “Demand for workers is also very high. With more jobs to choose from, Chinese factory workers now switch jobs whenever they can get a higher salary. That makes it difficult for us to find workers with enough experience. …So the cost of manufacturing in China is higher now, sometimes higher than Taiwan.”

It’s thought that in the future many more companies manufacturing in China will be forced to relocate, with serious implications for the global economy.

Companies that rely on cheap labour for competitive advantage are being hardest hit, and many are choosing to leave China rather than alter their business plans.

Last year, Taiwanese investments in Malaysia, Vietnam and Thailand increased by 44%, doubled or quadrupled, respectively.

Neighbouring countries such as Taiwan are doing all they can to encourage this influx of new investors, offering sweeteners such as cheaper land, lifting restrictions and helping firms to enter developing African and Middle Eastern markets.

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