Advantage wanes as wages rise

Cheap labor no longer powering China

Cheap labor used to be a key factor powering China's manufacturing sector to the world stage, but that's no longer the case, as wages for factory workers have surged significantly in recent years.

Chinese manufacturing workers earned $3.6 per hour on average in 2016, significantly surpassing that in manufacturing powerhouses like India, according to statistics from a report sent by strategic market research company Euromonitor International to the Global Times on Tuesday.

China's manufacturing hourly wage in 2016 is about five times the wage earned by Indian manufacturing workers ($0.7), 1.7 times that in Mexico ($2.1) and triple that in Indonesia ($1.2), the report said.

The report also showed that Chinese workers' average wage has been growing slowly but steadily in recent years, from $2.2 in 2011 to $2.8 in 2013 to $3.6 in 2016.

Liu Xuezhi, an economist with the Bank of Communications, said that rising wages in the manufacturing sector are "understandable" because of rising living costs in China.

"But rising labor costs will add pressure on the domestic manufacturing sector, especially on exports of commodities with low added value," Liu told the Global Times on Tuesday.

According to domestic media reports, some overseas brands are shifting their manufacturing bases from China to countries like India.

But Liu stressed that China's wage rise is still at a normal level.

"Too fast rise of wage would add hardship to economic structural adjustment, while too slow rise would hurt consumption. I think wage rise is acceptable as long as it is a little faster than the rise of inflation level," he said, adding that the country should insist on industrial upgrading by enhancing product quality.

On the other hand, the average hourly wage in China's manufacturing sectors still lags far behind developed countries like the US. As of the end of 2016, manufacturing workers in the US earned an hourly wage of about $20.7, data from the tradingeconomics.com showed.

The Euromonitor report also noted that as of 2015, the average hourly wages in developing cities were still more than four times lower than in developed ones, though the gap had contracted by about 10 percent since 2010.

There's still a "long way to go" if China wants to achieve developed countries' wage levels, according to Liu.