Economist Briefing : China's Labor Market

The Next China - 31 July 2010

• The strikes, stoppages, and suicides that have afflicted foreign factories on China's coast in recent months have shaken the image of China's workers as docile, diligent, and cheap.

• According to UNC-TAD, foreigners have invested almost 500 billion in China's capital stock. Their affiliates employ almost 16 million people. For a decade, this formula has dominated global manufacturing growth producing cheaper goods from China.

• As pay goes up, China's domestic market will become more lucrative.

• The worker's new assertiveness may reflect a labor law that gave more rights to the worker in January 2008. The strikers at Honda were better educated than typical migrant workers and were trained together which might have given them the glue to socially organize.

• China has the world's largest manufacturing work force of 112 million and generally cost about 2.7% of their American counterpart.

• Some think that China has exhausted its supply of surplus labor. Others think that the labor market may be segmented so that a surplus of labor on the countryside can coexist with a shortage on the coast. China's land policy where villagers lose their land if they don't tend to them may have an affect on unwillingness for people to leave to work in the factories.

• As China's villagers grow older, coastal factories will have to offer higher wages to tempt migration.

• China's sea coast ports are impressive, but it still lacks national trucking services which leaves them at the mercy of local provinces.

• The rise of inland provinces for industry will push labor demand higher, even as China's baby bust reduces supply. As a result, wages will rise at the expense of profits.

• China cannot rescue the world economy on its own. Its consumers spend only 13% of American GDP. And only some of the stuff it buys come from rich nations. But, some say if Chinese consumption rose by 20% and 25 billion were spent on US goods, it might create more than 200,000 American jobs.