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Sunday, October 03, 2004


Beijing yet to factor rising wage demands

The PRC's economy is likely to grow at a more sustainable pace of around 7 percent this year, instead of overheating. This is because macroeconomic controls adopted last year, particularly in the steel, cement, aluminium and real estate sectors, have helped cool off economic growth, Singapore's Straits Times reported.

The latest signals out of Beijing suggest that the Chinese central bank will not follow the United States Federal Reserve's move of raising interest rates to control economic growth. However there are fears of a resurgence of pent-up investment once the controls are relaxed.

The PRC's millions of export-industry workers may soon add substantial pay demands to the list of the central bank's concerns; that is, if the military allows them to be heard.

According to a recent report from the Ministry of Labor and Social Security quoted by The Washington Post, the PRC's factories lack 2.8 million workers, 2 million alone in the prime manufacturing zone along the Pearl River Delta:

It is not so much a labor shortage -- there are still tens of millions of peasants and former employees of the state-owned factories who need jobs -- as a mismatch between the cutthroat wage demands of the export trade and the rising expectations of Chinese workers ...

Where once a paycheck, even under harsh conditions, was enough to entice tens of millions of people to leave their villages in China's interior and flock to factories on the coast, workers are beginning to turn their backs on the prospect of laboring in 100-degree heat, living in rat-infested dormitories and being cheated out of their earnings.

As more and more of the world's manufacturing shifts to this country of 1.3 billion people, the notion has taken hold that China has so many peasants in such desperate straits that it will continue to press global wages lower for decades, particularly given that independent labor unions are banned and even the threat of organization meets with stiff prison sentences.

However, with workers already voting with their feet, some economists foresee steady wage growth as factories are forced to improve working conditions to keep operations running.

According to Jonathan Anderson of UBS Investment Research in Hiong Kong, "manufacturing wages are going up, and they are going to keep going up." He predicts that the PRC will continue to capture low-end manufacturing jobs from around the world for the next decade but, by then, average wages are likely to exceed $100 a month, up from the current $50 to $60.

A doubling of wages, even over a decade, adds an interesting dimension to economic planning.

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