BOFIT Viikkokatsaus / BOFIT Weekly 2017/09

The latest household survey of China's National Bureau of Statistics finds that wage growth in urban areas slowed to 7 % last year, down from 8 % in 2014 and 2015. The rise in rural wage levels also slowed, but was slightly faster than in cities. Based on China's earlier official wage figures, we estimate the average urban wage last year was about €750 a month. However, there are huge variations in wage levels across provinces and branches. For example, the average private sector wage in the advanced Jiangsu and Guangdong provinces is 50 % higher than in provinces such as Jilin and Heilongjiang. In recent years, the rise in private sector wages in poor provinces has been slower than in advanced provinces.

Information from Hay Group, a global management consultancy, also shows slowing wage growth similar to the NBS household survey. China's rapidly rising wages over many years have made it pricey by emerging economy standards. The average wage for Hay Group's customer base in China was higher than in Russia and already about a third of the average wage in the United States. Wage spreads are larger in China than in Western countries, especially between upper management and staff.

The rapid rise in labour costs has caused an ongoing shift of labour-intense production away from China to other countries. In addition, Chinese firms are automating and China is already the world's largest market for industrial robots. China has moved to more sophisticated products and production. These trends seem destined to continue in coming years.