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The competitiveness of China's labor costs

By Barry in 'The China Sourcing Blog'

Low labor costs have been a crucial element of China's low cost country sourcing advantage. Yet in the course of this year a series of strikes and labor shortages in China have to some observers heralded the end of the era of 'cheap' China. Salary increases have supposedly become common in China's manufacturing sectorhigh-profile increases at firms like Hon Hai and Foxconn have been prominent examples of this. (For more detailed analysis on these developments this year, see this article by the Wall Street Journal's Andrew Batson and Norihiko Shirouzo).

Looking over the course of the 2000s, however, it is clear that China's labor costs have crept up marginally, yet as they are rising from such a low base they are still vastly in arrears of labor costs in developed countries:
Labour costs.pngYet if we compare China's labor costs over the same period with other developing countries, China's advantage is still perceptible, yet it no longer has a singular advantage:
Labour costs2.png
Over the course of the decade, China's labor costs have gradually eclipsed those of Vietnam and Indonesia, yet it is still below those of countries like Mexico, Brazil and Hungary. The next 10 years, however, might very well see China catching up with these countries.

 

 


The China Sourcing Blog is THE BEIJING AXIS online media platform to track the latest trends on sourcing and the Chinese economy. Taking on a multi-faceted, dynamic subject and carefully scanning everything from the mainstream media to the distant corners of the Internet, CSB strives to get to the bottom of all the best bits and pieces on China sourcing.

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