China Financial Center Sees Slowest Minimum Wage Rise Since 2009

Updated on
  • Shanghai increases minimum monthly pay 8.4% to 2,190 yuan
  • Takes cautious approach to labor costs as economy slows down

Shanghai announced its smallest minimum wage increase in seven years, as income growth takes a back seat amid the cooling national economy.

China’s financial center will increase the mandatory monthly minimum wage by 8.4 percent to 2,190 yuan ($339), effective Friday, the municipal government said on Thursday. That compared with an average annual increase of 13 percent over the past six years. It’s the slowest gain since 2009, when the global finance crisis hit China and Shanghai froze minimum pay increases.

The moderation in wage growth indicates government concern that more rapid labor cost growth may speed a loss of competitiveness among manufacturers. Shanghai’s announcement followed a February decision by the southern province of Guangdong -- China’s biggest exporter and a prime destination for rural job-seekers -- to freeze minimum wages for two years.

China doesn’t have a national minimum standard and cities and regions set their own rates. Salaries have risen faster than labor productivity in recent years, and that’s "not sustainable in the long run," Finance Minister Lou Jiwei said March 7 in a news briefing during a session of China’s national legislature.

Shanghai is one of the most prosperous and productive regions in China, with an economy dominated by the services sector. The industrial sector in poorer regions, such as the country’s rust belt in the northeast, are under higher pressure to cut costs. Heilongjiang, Liaoning and Jilin provinces haven’t raised minimum wages since 2013.

China’s factory engines saw a sign of relief in March, as an official manufacturing gauge showed improving conditions for the first time in eight months, according to a government release on Friday. A services measure also climbed last month, boosting confidence in the growth outlook of the world’s second-largest economy.

The nation’s minimum wages have increased by an average of 13.1 percent annually over the past five years, but still fall short of the government’s target for the minimum to exceed 40 percent of average salaries in a region, the Communist Party’s People’s Daily said in an article this month. The newspaper said that such minimum wage increases weren’t excessive enough to hamper employment.

Salary increases for migrant workers could fall below 7 percent this year and disposable income for average Chinese consumers will moderate, according to economists surveyed by Bloomberg News this month.

— With assistance by Xiaoqing Pi

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